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Published
Jun 21, 2021
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Landlords unhappy over eviction ban extension, reel from new lower rent ruling

Published
Jun 21, 2021

Angry commercial property bosses are planning to fight against the UK government’s nine-month extension to further protect tenants from being evicted.


Bullring


The move comes amid further bad news for store owners in London after a judge ruled a retailer was in fact paying too much rent.

Both stories reflect two opposite sides or the rent issue with justification on both sides.

Private property companies are discussing taking legal action against ministers for extending emergency legislation until next March to protect struggling retailers that have been hit hard by the pandemic, according to the Times newspaper.

The report said some landlords are discussing forming their own lobby group amid frustration with the British Property Federation’s lack of results. It also said one unnamed landlord is even considering approaching the opposition Labour Party to take up their case against the government.

While retailers will start paying business rates on their premises again from next month, property companies still can’t force their tenants to pay rent, landlords noted.

Gerald Kaye, chief executive of Helical, the listed property company, told the newspaper: “It’s entirely wrong that one set of shareholders is discriminated against in favour of another set of shareholders. Landlords are pension funds, people’s savings, charities. Why should they have to suffer”?

Since the government launched a ban on evictions and winding-up petitions 15 months ago, property owners have lost more than £6 billion, or £1 in every £6 of rent due, according to Remit Consulting.

While many smaller tenants have been supported by landlords or have paid rent, larger retailers including Boots, Superdrug, JD Sports and H&M have taken advantage of the legislation to defer payments, the report claims.

Although the government has agreed to ring-fence arrears and set up an arbitration system until next March, landlords also said the decision created uncertainty about rental income for property companies well into the next financial year.

Analysts say the new measures threaten the financial health of some of Britain’s biggest property companies. Shopping centre owners such as Hammerson, the owner of Birmingham’s Bullring, which has a strong exposure to high street chain stores, are most vulnerable.

In other bad news for property owners, a judge has ruled that annual rent for a retail unit in Central London should be less than half it was in 2011, reported Property Week.

Setting a commercial precedent that could could hit prime West End rents, the judge ruled that textiles retailer S Franses should pay £102,000 in rent a year for its store in the Cavendish Hotel on Jermyn Street. That compares to the £220,000 it was paying before its lease expired in 2016. 

The case arose when the landlord refused to renew S Franses’ lease in 2016 saying it wanted to split the unit into two smaller stores. 

In 2018, the Supreme Court ruled against this and S Franses has remained in occupation without reaching a new lease agreement, therefore paying its initial rent of £220,000. 

However, the judge has said, given market conditions, the interim rent should have been £160,000, meaning S Franses will now receive a rebate of around £330,000. 

David Cooper, who represented the tenant, told Property Week the decision to slash the rent owed will have a “dramatic” impact on the retail property market, particularly for vacant units. 

“It has the most serious implications on new tenants who are coming in, who are going to say, ‘why should I overpay?’ That is then going to have a serious impact on the reversionary values for landlords, because they’ve been punting stuff around at vast increases to that level”, said Cooper. 

“They now have to have a bit of reality set in, because the world’s going to know that what they’ve been asking is unreal. It’s going to bring some realism to the market”. 

He also told Property Week that the ruling would also have implications beyond new lease negotiations for a vacant unit: “Every sensible tenant now is going to want to pay less.” 

Cooper said the next logical step will be to work towards the removal of the upward-only rent review clause from leases.

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