Property giants have proposed there is six months breathing space for landlords and retail and hospitality tenants to settle billions of pounds worth of pandemic-related rent arrears.
However, while the real estate sector hopes to offer more time for resolving historic bills, it wants new rents to be paid on time when a moratorium on business evictions ends.
Proposals to resume a “normal market operation” from June 30 come as the retail market starts to spring back into life from the latest lockdown.
The owner of the Westfield shopping centres said its London sites had over one million visits in the week starting April 12, and that footfall was at 75% of the 2019 level.
Meanwhile, WH Smith plans to expand with some 100 new travel stores.
Landlords British Land, Landsec and the British Property Federation set out their suggestions in response to the government’s call for evidence on the best way to withdraw or replace measures that have helped high street firms ride out the virus crisis.
A ban on business evictions came in last year and was most recently extended to June 30.
While some tenants have agreed rent holidays or deferrals with landlords during the pandemic, a number have not and had been worried they will not be able to pay the outstanding rent, after suffering months of closures in lockdowns.
Meanwhile, in some cases landlords say some occupiers refusing to pay rent are big, profitable companies.
Under the latest proposal from the property sector, normal rents would resume from the June quarter date and payments owed from before then will be ring-fenced. All parties would have have until December to come up with plans, such as full repayments, deferrals or discounts for example.
Payments could be deferred until after this date if an agreement has been reached.
Where an occupier and property owner are unable to reach a settlement, they would submit to binding arbitration.
Simon Carter, chief executive of British Land, said: “This is about moving forward and coming out of the pandemic, so customers can trade without fear of arrears hanging over them, and property owners can have confidence to invest in the post pandemic recovery.”
Landsec boss Mark Allan said: “This proposal is a practical solution, with the interests of all parties at its heart. By separating historical rents owed from future rents, this will provide a pathway back to normal market conditions that will help drive economic recovery from Covid-19.”
Melanie Leech, chief executive of the British Property Federation said: “The majority of property owners have already reached agreement with their tenants, providing millions of pounds of support to those tenants hardest hit by Covid-19. However, as public health restrictions ease and consumer confidence and spending continues to grow, we now need to find a fair solution to resolve the discussions that are stalled so that all parties can focus on the future.”
Tom Ironside, director of business and regulation at the British Retail Consortium, said: “Retailers want to work constructively with landlords to find a deal that works for everyone, and this proposal is a positive start. However, before such a scheme could be workable, it must close the loophole of using CCJs to chase tenant debts, or else the entire proposal to ringfence arrears will be undermined.”
He added: “A workable scheme must also allow tenants to maintain their legal right to restructure companies to better manage their debts. We’re keen to work with landlords to improve the proposal, ensuring all sides share the pain equally. This is the best way to protect jobs, keep businesses trading and support the economic recovery.”