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New Government Rules Will Force Landlords To Negotiate With Tenants

Leicester Square

Last week the government introduced new rules prohibiting commercial landlords from using the courts to try and force tenants to pay rent for the next 90 days, as businesses try to negotiate the fallout of the coronavirus pandemic.

The property industry has pushed back against the measures, saying that without the threat of legal proceedings, some tenants that are able to pay rent will take the chance to withhold payment, thus shifting the financial impact of the crisis from tenants to landlords.

But according to one adviser in the thick of rent restructuring negotiations, the new rules will have the impact of bringing aggressive landlords to the negotiating table, and bringing about a solution where all parties are equally unhappy — the best you can hope for in the current climate. 

“Litigation is not the answer,” The Lorenz Consultancy Managing Director Anthony Lorenz said. His firm is handling close to 100 situations where tenants, particularly in the London leisure, hospitality and retail sectors, are negotiating with landlords over restructuring leases.

“This should mean we don’t get into situations where landlords are being aggressive, and parties can come together and find measures that suit everyone,” he said. “It is fine for landlords to start preparing for liquidation if they can’t come to a suitable agreement. But if landlords just push tenants into liquidation then 30% of Leicester Square will be boarded up, because there will be no one else there to take their place, and that starts to affect tourism.”

He said the vast majority of tenants are not using the current situation to avoid paying rent if they can afford it — many tenants saw revenue almost disappear overnight, and are not paying rent to try and avoid their business going bust. 

“This is not the 1960s when a landlord would sit there with their feet up on the desk and puff cigar smoke into someone’s face and say, you’re the tenant, pay up,” he said. “We’re entering a new world now.”

Lorenz said the experience of his firm is that while landlords are in some cases waiving Q2 rents altogether, many are offering rental deferrals, meaning tenants still owe rents but can pay later. But he believes this is not a solution to the current problem. 

“Rent deferrals are just kicking the can down the road, as tenants won’t be able to afford to pay further down the line either,” he said. “You will just see liquidations happening in 2021 instead of 2020.”