By Daniel Berger
“BBS Law’s service to help landlords struggling with their rent recovery so that they obtain the best possible support from their lenders”
The day before the March 2020 quarter day I wrote an article about how to try and deal with mass non-payment of rent. Since then Landlords have many stories to dine out on (if you could go to a Restaurant) about which tenants have asked for the more outrageous rent concessions.
Clearly all parts of the economy have suffered under the handbrake that has been yanked on by global lockdown, and there are many tenants that deserve sympathy, others less so. We are now mid-way through the quarter and Landlords are looking to the June quarter day with trepidation.
“It is likely that even fewer tenants will pay rent on the June quarter day as the Government has given more green lights to them to stop paying rent.”
The extended measures to protect tenants beyond the three month moratorium brought in during late March include:
- Before any winding-up petition is made based on claims that the tenant is unable to pay its debts, must first be reviewed by the Court to determine why. The law will not permit petitions to be presented, or winding-up orders made, where the tenant’s inability to pay is the result of COVID-19. Which landlord fancies spending time and money getting to the Court to explain that one !
- Legislation will also be brought forward to prevent landlords using commercial rent arrears recovery (CRAR) unless 90 days or more of unpaid rent is owed
- The new legislation to protect tenants will be in force until 30 June, and can be extended in line with the moratorium on commercial lease forfeiture. In all likelihood it will be extended
A link to the full Government release is here: https://www.gov.uk/government/news/new-measures-to-protect-uk-high-street-from-aggressive-rent-collection-and-closure
So here you are 7 weeks into lockdown and looking at a significant arrears schedule that is likely to get substantially worse come the end of June. Most commercial landlords will have some loans secured on the now non-income producing property, and whether capital and interest, interest-only, quarterly or monthly it is now impossible to avoid a repayment date passing without having had the rent hit the bank account. Prudent landlords may have left sufficient funds in the rent receivable to service the loans for a few months. It would be rare to find such accounts bulging though.
So you look around and see the Government policy seemingly stacked against landlords and other policies and generous financial help for tenants in terms of furlough for non-working staff, rates relief, business grants and loans on generous terms. Where can the landlord seek help. So far, we can’t find any. Landlords are being encouraged to “talk to your tenants”, “be reasonable”; Communities Secretary, Robert Jenrick, says: “We understand that landlords are facing their own very serious pressures and are concerned about their position with lenders. We are working with banks and investors to seek ways to address these issues and guide the whole sector through the pandemic.”
It seems the only help the landlords are getting is at the discretion of the lenders. When speaking to many commercial property clients we are seeing very mixed responses. Interest holidays are simply not available. Capital repayments can be suspended for 3 or even 6 months if you are with certain banks and you fit their “criteria”. We are seeing some banks giving no leeway at all, and that old phrase of “selling umbrellas when the sun is shining” seems apt.
The retail banking industry providing residential mortgages has given 2 million mortgage holidays providing some temporary relief to squeezed and worried householders. We are not seeing this on the commercial side at all.
BBS Law Ltd can help you in reviewing your banking documentation and assisting you with documenting any arrangements you come to with your lenders. We also feel we are well placed to assist you in direct negotiations with banks, helping you present your position in the most favourable of manners and being able to advise what concessions more helpful and flexible lenders are providing.
Our commercial property, commercial and secured lending teams at BBS Law Ltd for advice on your situation and how we can help you at this most challenging of times.
Please contact Daniel Berger, Dov Black or Avi Barr if you would like further assistance.