Government measures to further restrict commercial landlords simply delaying problem, says law firm Royds Withy King

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Retailer and leisure occupiers have welcomed further restrictions on commercial landlords against aggressive debt recovery actions, yet with landlords increasingly feeling they have been hung out to dry what should retailers expect when restrictions are lifted?  

Vicky Hernandez, a partner in the Real Estate team at Royds Withy King and whose clients have included AllSaints, Ladbrokes, Moss Bros, The Body Shop and Arcadia Group, comments. “Institutional landlords and those with a public reputation to protect have largely avoided the aggressive rent recovery behaviour. It is, however, the next tier of commercial landlords with little or no public face that are adopting increasingly aggressive attempts to recovery unpaid rents.

“Retail and leisure occupiers will welcome this respite but they should be prepared to respond when restrictions are lifted in May or June. Retailers should expect their landlords to continue to protect their own business interests and will need to be able to meet immediate rent demands. They will also need to have strategies in place to meet rent payments for the rest of the year and for many that is likely to be challenging.

“Retailers are also finding themselves being pursued for unpaid rents on leases that they have sold on or transferred to third parties and where those transfers include guarantees. These sales or transfers may have happened many years earlier and have been forgotten or overlooked, adding further pressures on occupiers.

“Retailers need to check historic leases and need a good working relationship with their landlords, now more so than ever, and that is best achieved through an open dialogue with them. We would urge both landlords and their occupiers to speak regularly and openly about the challenges they face and try and reach a workable solution.”

The current restrictions on rent recovery actions will be lifted at a time when retailers face many other problems too, as Vicky Hernandez explains.  

“Retailers will be returning with spring stock in store when they would normally be focusing efforts on summer lines. They will need to dispose of old stock and are likely to face challenges in restocking. They are also likely to have to introduce social distancing measures, all at a time when landlords will be increasingly impatient.”