PLC’s pushing small landlords over the edge

by Readers Question

10:27 AM, 25th March 2020
About 8 months ago

PLC’s pushing small landlords over the edge

Make Text Bigger
PLC’s pushing small landlords over the edge

We are a small landlord and few days ago we received a letter from our key commercial tenant who provides our main form of income. This tenant states in their letter they are “an incredibly successful plc , a well capitalised and financed business with a track record of continued growth and profitability.” However the last few weeks have challenged their financial position.

They are “putting forward to all landlords a 3 month/quarterly rent payment holiday. This would compromise a waiver of the rent for that period, not a deferral of payment and that this would not constitute a breach of the lease.”

Their rent is due tomorrow and our commercial loan is due out in 7 days, without the rent we cannot make the payment. We have contacted the bank they can only delay the capital and we still need to make the interest payment, which is still a substantial amount as our loan terms are a fixed percentage plus base rate.

This company is a plc with a gross profit which is millions of pounds and they are saying despite all the government grants, government support for its staff, halt on the business rates they cannot pay us a penny in rent.

Does anyone have any advice?

Zara


Share this article

Twitter Facebook LinkedIn

Comments

Doug Ellison

8:52 AM, 26th March 2020
About 8 months ago

Hard to see how they would not be breaking the terms of their lease!
Why don’t you tell them the facts,their failure to pay you will result in your failure to make the impending mortgage payment.Should this happen you will take Court action to remedy their failure to honour the terms of the lease.
Perhaps offer a carrot of whatever short term reduction you can afford as an alternative!
Got to be worth a try!!

Beaver

9:34 AM, 26th March 2020
About 8 months ago

Reply to the comment left by Doug Ellison at 26/03/2020 - 08:52
If this is the exact wording of what they sent to you:

"....putting forward to all landlords a 3 month/quarterly rent payment holiday. This would compromise a waiver of the rent for that period, not a deferral of payment and that this would not constitute a breach of the lease.”

I would infer from this that they have already taken legal advice and know that this *would* be a waiver of the rent and that this *would* constitute a breach of the lease *unless* you accept it. So I would go back to them and say that this *would* constitute a breach of the lease and that you do not accept it and are unable to accept it because you have mortgage payments to make and cannot make the mortgage payments unless they also pay.

Darren Peters

9:35 AM, 26th March 2020
About 8 months ago

If you do agree any reduction, ensure it is as a deferral and not a waiver.

You will not be allowed to waive your debt, at best you'll get a holiday and extra interest payments. It's not your job to subsidise large, successful PLCs

Ian Narbeth

9:36 AM, 26th March 2020
About 8 months ago

Hi Zara, unless they have a break clause or the term of the lease is ending, they have no legal exit route and cannot require you to forgo rent, only to defer it which de facto is what the Government proposes. I doubt you will wish to forfeit the lease at the moment in any event. There may be other options but I suggest you contact your lender and explain the position and ask for a payment deferral of interest which can be rolled up and added to the loan..

Sandwood

9:48 AM, 26th March 2020
About 8 months ago

Hi Zara
We are in a similar position. Perhaps like you we are incorporated but classified as an investment company and so not eligible for the Gov't's Business Interruption loan scheme which may have assisted in dealing with deferred rents. I have lobbied my MP on this to see if landlords can be included in the scheme. The last thing the economy needs is thousands of bankrupt landlords! Perhaps we should all lobby our MPs. Mine said he was not aware of the issue but will raise questions.

Pete England - PaTMa Property Management

10:13 AM, 26th March 2020
About 8 months ago

I seem to remember there is a law which stops a plc or large business holding back or late paying small business. I suggest you contact legal advice on this one.

ray selley

11:02 AM, 26th March 2020
About 8 months ago

Reply to the comment left by Sandwood at 26/03/2020 - 09:48
Primark is to withhold this quarters rents on all of its 110 leasehold stores in a bid to force landlords to consider revising terms urgently.

Ian Narbeth

11:25 AM, 26th March 2020
About 8 months ago

Reply to the comment left by ray selley at 26/03/2020 - 11:02As I understand it, commercial tenants are able to defer rent and landlords will not be able to forfeit. No doubt some tenants, especially retailers, will look to re-negotiate rents but that was happening before COVID-19. Many landlords will have to assess whether their tenant will go under without a rent reduction. Alternatively, tenants will go for a Company Voluntary Arrangement (CVA) and impose rent reductions on landlords.

Darren Peters

11:38 AM, 26th March 2020
About 8 months ago

Reply to the comment left by Ian Narbeth at 26/03/2020 - 11:25
"Alternatively, tenants will go for a Company Voluntary Arrangement (CVA) and impose rent reductions on landlords."

leaving temporary Covid laws to one side, who imposes this on a landlord? official receiver, Courts? Does the landlord have the right to forfeit the Lease and take control of the property? (If they want to?) Or must they accept by law?

Does the voluntary arrangement attempt to state the rent is too high so should be adjusted? In which case an independent valuation could be used to counter. Or is it just, 'the tenant can't afford to pay so you have to take a cut'?

Ian Narbeth

12:00 PM, 26th March 2020
About 8 months ago

Reply to the comment left by Darren Peters at 26/03/2020 - 11:38
Hi Darren
The answer is rather too complex to post here (and I am not an insolvency specialist) but what has happened with a number of tenants is that they put together a CVA under which they agree to pay all creditors 100p in the £ except landlords, who will take a rent reduction. Creditors (other than those with security) get to vote and if a majority approve then the CVA comes into force. There may also be a moratorium preventing landlords from forfeiting the lease.

In the current market landlords may not want to forfeit, because (a) it stops the tenant trading from the premises which affects profitability, (b) the landlord will have responsibility for outgoings and (c) the Landlord may not be able to recover damages.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Compliance Conundrum when tenant won't leave?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More