Landlords Want To Split Rental Losses With Banks
UNITED KINGDOM – Businesses in the country have missed paying £4 billion (US$5.5 billion) in rent last year due to dismal foot traffic and enforced closures because of the COVID-19 pandemic. With rents coming due by end March, tenants are asking for government help, while landlords are urging banks to share in the burden, reported Bloomberg on Tuesday (2 February).
While the authorities and industry stakeholders are discussing who should ultimately pay for the amassed rent, retail tenants and restaurant owners believe that it isn’t right for them to shoulder all of the owed rent.
“The notion that retailers should be expected to pay 100 percent of the rent for the periods they have been closed is a little unfair,” said bookstore chain Waterstones’s CEO James Daunt.
“It is also unreasonable for the government to be washing their hands of it. I think the government has abrogated its responsibility.”
Daunt said the latter after the UK’s Chancellor of the Exchequer Rishi Sunak’s initial response was to impose an eviction moratorium, as well as provide a property-tax holiday for landlords and help businesses with staff wages.
Meanwhile, an industry body representing about 200 landlords here known as the Property Owners Forum has submitted letters to government agencies requesting for lenders’ forbearance. They are also seeking holidays on interest & capital repayments for mortgages backed by properties where rent hasn’t been paid because of COVID-19 restrictions.
The group’s Chairman Adam Coffer said landlords are stuck between demanding lenders and struggling tenants. “You are going to have a huge bottleneck of debt when the moratorium ends and if the government extends it, they are just kicking that can down the road.”
Notably, the Coronavirus Act legislated last March imposed a 3-month freeze on commercial landlords’ power to evict non-paying lessees. While the moratorium has been extended several times, the authorities stated in December before the new COVID-19 strain emerged that the present extension until 31 March 2021 would be the last.
Based on data from Remit Consulting, £4.2 billion out of £23 billion commercial rent due in 2020 was unpaid. In addition, nearly one-third of the rent due on 25 December for the next three months hadn’t been paid in 21 days.
As struggling tenants are unlikely to be able to pay rent to their landlords, the Bank of England is calling on financial institutions to be conscientious in how they handle mortgage agreements with landlords, as the growing pile of unpaid rent could ignite another wave of loan defaults and businesses bankruptcies.
Specifically, the central bank is urging lenders to “consider carefully their responses to potential breaches of covenants arising directly from the COVID-19 pandemic and its consequences.” However, there’s still no clear or concrete action plans from financial institutions.
“We have asked just about every bank the same question about capital and interest repayment holidays and none of them has given a meaningful response,” shared Kevin Hollinrake, a Conservative MP and Co-chair of the All Party Parliamentary Group for Fair Business Banking.
“Most landlords are working with tenants to come to sensible arrangements but some of the big chains have behaved very unfairly,” Hollinrake told Bloomberg.
Furthermore, there are indications that banks have started exerting more pressure on landlord borrowers as the health crisis heads into its second year.
For instance, the owners of the Devonshire Square complex in the City of London were compelled to inject cash last December to remedy a breach in the terms of their mortgage bonds. This is after a private members club at the development went bust and anchor tenant WeWork scaled down its expansion plans there, it said in a filing to bondholders.