Two-thirds of retailers face legal action in July over rents
On 30 June 2021 the moratorium on aggressive debt collection from commercial landlords will end, opening up thousands of retailers to legal action. With many retailers closed for large periods during the last fifteen months, many have accrued huge debts that they are only just beginning to be able to pay. Total rent debt is estimated to be £2.9bn. Already, one in seven shops lie empty (BRC-LDC Vacancy Monitor, Q1 2021), with this number expected to rise.
A new survey of retailers by the BRC shows that two-thirds of retailers have been told by landlords that they will be subject to legal measures from July, once the moratorium on aggressive debt enforcement ends. Almost one third (30%) say they have already faced County Court Judgements (CCJs) from commercial landlords. Furthermore, 60% of landlords have given tenants less than a year to pay back rent arrears accrued during the pandemic.
The government introduced a Code of Practice last year to address the outstanding debt issues. Unfortunately, two thirds of those surveyed described the Code as ‘ineffective’ due to its voluntary nature. Government must give the Code greater weight and take other measures to support tenants and landlords.
The British Retail Consortium believes that government must take steps to resolve the rent debt in a fair and equitable manner:
- Ringfence the rent arrears built up during the pandemic and extend the moratorium on repayment of these debts to the end of the year
- Extend the protections on these debts to include County Court Judgements (CCJs)
- Introduce compulsory arbitration from 1 January 2022 using the Code of Practice, to give teeth to this otherwise weak process
Retailers are running out of time to save their businesses. Where agreement cannot be reached by 1st July between retailers and landlords, many shops will find themselves unable to maintain their presence on high streets, shopping centres and retail parks.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Many retailers have taken a battering over the pandemic, but they are now getting back on their feet and playing their part in reinvigorating the economy. The unpaid rents accrued during the pandemic, when most shops were shut, are a £2.9 billion ball and chain that hold back growth and investment and could result in a tsunami of closures.
“Government must ringfence the rent debts built up during the pandemic, giving retailers breathing space as they wait for footfall and cash flows to return. With this in place, all parties can work on a sustainable long-term solution, one that shares the pain wrought by the pandemic more equally between landlords and tenants. Without action, it will be our city centres, our high streets and our shopping centres that suffer the consequences, holding back the wider economic recovery.”