Retailers will be expected to pay rent quarterly in advance again in line with lease terms once protections for commercial tenants end, according to British Land.
Many retailers have moved to monthly payments while protected from eviction and rent debt recovery under emergency measures introduced by the government last year. Some have argued it represents a permanent shift across the market which landlords should accept.
However, British Land – one of the UK’s biggest landlords – predicts the trend will reverse in line with contractual payment terms once landlords’ hands are untied.
From 25 March, landlords will again be able to take action to recover rent debt, including seizing goods in lieu of payment.
British Land does not expect to pursue tenants, having worked through most rent arrears, but sees it as inevitable quarterly payment intervals will be restored as a result.
Moving to monthly payments has been helpful for retailers’ cashflows in the pandemic, but landlords are also likely to add interest to late payments to bring them back into line with lease terms.
It could mean a climbdown for some retailers who have seized upon the adoption of monthly payments in the pandemic as an ongoing expectation across all stores.
While there is a shift towards contractual monthly payment terms in new property deals, many existing leases across the market retain the traditional quarterly terms. Poundland is among retailers to have set monthly payments as an expectation across its whole estate.
Poundland had already achieved the terms on many stores before the onset of the pandemic and used the protections to move the remainder to monthly. It also pushed further than some retailers by paying monthly in arrears rather than advance.
In June last year, Poundland head of portfolio management Ben Wall told The Grocer: “Those landlords we’ve agreed it with have an understanding that there is going to be a shift in the traditional matrix of a lease.”
The government this week published draft legislation for a legally binding arbitration process for resolving rent debts accrued because of the pandemic.
It also published a new Code of Practice for negotiations between landlords and tenants after 25 March. It sets out that tenants unable to pay should negotiate in the expectation the landlord waives some of the arrears where possible.
“While we support the principle of compulsory arbitration, the devil will be in the detail,” said BRC CEO Helen Dickinson.
“We will engage closely and constructively with government to help ensure their proposals protect otherwise viable businesses, secure the recovery, and protect jobs.”
Alastair Massey, partner and restructuring expert at advisory firm FRP, which has been involved in a number of recent high street administrations, said: “The reality is that a number of protections afforded to businesses, including the eviction moratorium, are coming to an end.
“At the same time, many retailers are also sat on additional Covid debts including PAYE, national insurance and VAT, so it’s important they get round the table with landlords and agree a deferred payment plan that reduces at least some of the pressure building among creditors.”