Landlords across the North West are being warned that retailers could struggle after rent Quarter Day last week, and could leave many with limited options possibly leading to administration.
Rent Quarter Days have become a notorious crunch time when retailers get into difficulties, unable to meet the obligation to pay three months up front rent on their stores. The pressures apply from corner shops to large chains and were linked to the demise of some of the UK’s big High Street brands including La Senza, Blockbuster and Phones4U.
Lisa Evans, a solicitor and commercial property specialist at Kirwans, believes that the impact on landlords is often overlooked. She said:
“Conditions are still tough for retailers and the Quarter Day means they trade through one of the most financially stressful weeks of the year,
“Cash is king and some retailers can find themselves in a perfect storm, unable to pay advance rent, meet payroll at the end of the month and maybe even face a VAT bill too.
“There’s a lot of goodwill and sympathy towards the High Street but the landlords need consideration too. Property is an expensive asset and landlords have their own obligations to meet. Finding yourself with a tenant who can’t pay is a significant issue.”
Landlords can look at a number of options before the ultimate sanctions of evicting tenants, Lisa added:
“It is better to have a tenant in place, rather than overseeing a vacant property,
“As in so many situations in business, negotiation is key. Having a straightforward conversation with your tenant about what they can afford and how you can work through the situation, is an important first stage in coming to a solid agreement.
“There are a number of legal options and next steps that landlords can follow depending on how the negotiations go.”
Key steps that landlords can take include negotiating with their tenant a temporary change to the lease. This could see the tenant paying a smaller amount over a shorter period for a specified time – such as monthly, or weekly payments – until they are able to return to the original lease conditions.
If landlords do go down the negotiation route, it’s advisable to operate via an agent or a solicitor to ensure the agreement is properly documented.
Tenants can also be asked to provide a guarantor to provide additional security and should be asked to make sensible commercial recommendations for how they expect to pay the rent via an agent. If all else fails, the lease may be forfeited and landlords may be able to levy distress and enforce security, claiming back the outstanding rent via any deposit held.