Thousands of landlords with commercial properties will be watching their bank accounts nervously today as they wait to see if tenants are able or willing to pay their quarterly rent in advance.
Dubbed watershed Wednesday and largely predicted to be a disaster for many landlords who have tenants operating in vulnerable areas of the economy worst impacted by the lockdown, today is June quarter day.
The consensus among landlords and managing agents is that the payments won’t be arriving, and that many tenants will have already negotiated deals to get around this latest Coronavirus rent cliff face or will be making the brutal choice to prioritise staff pay over rent.
The government has also made this easier – tenants are in effect protected from eviction at the moment by measures introduced at the end of March.
“At present, landlords cannot exercise their rights to re-enter premises or forfeit leases if their tenants have not paid rent. This ban on evictions was due to end on 30 June 2020 under the provisions of the Coronavirus Act 2020,” says Katie Hickman of legal firm VWV.
“But the Government intends to exercise its powers to extend this period and has accordingly announced that no business tenant will be forced out of their premises for non-payment of rent until 30 September 2020 at the earliest. The Government has the power to extend this period further if necessary.”
Every quarter £2.5 billion is collected from high street tenants alone, according to the British Property Federation, but one shopping centre owner recently revealed that it had only collected 56% during the last quarter day, and was nervous about what will happen this time around.
“I think that today and going forward will result in more tenants struggling and asking for help, especially those involved in beauty and nail salons who are yet to be allowed to open. There will be lots more conversations between landlords and tenants in the coming days and weeks.”
Property industry commentator Russel Quirk agrees, saying that times have changed dramatically – “normally June quarter day is a highlight of the calendar for retail and office owners”.
“But today, I suspect, far from it. Hundreds of thousands won’t pay. But only some of them can’t pay.”
As Russell alludes to, the biggest question today for landlords is whether tenants will take matters into their own hands and withhold rent as they scramble to protect what cash flow they do have to pay other bills – for example many forget the furlough system is not a cost-free scheme for employers.
Late last month the government announced that it had set up a working group to establish a ‘fair and transparent’ code to help landlords and agents ‘spread the financial burdens created by the crisis across the sector’. But this will come too late for today’s deadline.