UK

Two-thirds of retailers face legal action in July over unpaid rents
BY TOM BOTTOMLEY
-30TH MAY 2021

© TheIndustry.fashion

On 30 June 2021 the moratorium on aggressive debt collection from commercial landlords will end, opening up thousands of retailers to legal action, according to a new survey by the British Retail Consortium (BRC).

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.

Almost one third (30%) of retailers say they have already faced County Court Judgements (CCJs) from commercial landlords. Furthermore, 80% of tenants said some landlords have given them less than a year to pay back rent arrears accrued during the pandemic.

Already, one in seven shops lie empty (according to the BRC-LDC Vacancy Monitor, Q1, 2021), with that number expected to rise. The BRC says that without action the end of the moratorium could result in “a tsunami of closures.”

The government introduced a Code of Practice last year to address the outstanding debt issues. Unfortunately, the BRC says two thirds of those surveyed described the code as ‘ineffective’ due to its voluntary nature.

The BRC is urging the government to give the code greater weight and take other measures to support tenants and landlords, including:

Ringfencing the rent arrears built up during the pandemic and extend the moratorium on repayment of these debts to the end of the year

Extending the protections on these debts to include County Court Judgements (CCJs)
Introducing 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 1 July, 2021, 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 BRC, 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.

“The 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.”

The BRC survey was conducted in April and May, 2021, and respondents account for over £12bn in turnover and 5,000 stores.