Date 25 March 2009
Who will be left standing?
Quarterly rent payments are due today, but poor sales over Christmas, and low consumer spending in the first quarter of 2009 have left many retailers struggling to find enough cash to fund the next three month’s rent in advance.
Over the coming weeks expect to see a few more household names disappearing from the high street as defaults in quarterly rent payments come out in the wash. At least some of these casualties could have been avoided by consulting with the landlords at the earliest possible stage – hiding your problems from your landlord is unlikely to be successful in the long run.
Even those retailers who have managed to fund this quarter’s rent should be wary of the poor outlook on the high street for the next quarter. Why not start to make arrangements for June’s rent now by negotiating with your landlord? If the retailers who are struggling are getting better terms, those who are weathering the storm should take advantage too and ease their cash flow by arranging concessions with their landlord – and you might be surprised at just how accommodating they are.
It is not only the tenants that have been suffering – all of the big 5 commercial landlords (Land Securities, British Land, Hammerson, Segro and Brixton) have called for funds from their shareholders in the last 12 months to top up their balance sheets that have been hit by the plummeting value of commercial land. It is not in the Landlord’s interest to see the tenant become insolvent, as this would further reduce their income and the value of the land that they own. It is therefore understandable that Landlords are making every effort to support their tenants wherever possible by offering flexible terms such as monthly rent, deferred rent and reduced service charges.
Also, it’s worth remembering that it’s not all doom and gloom in the retail market - yesterday photographic store Jessops took the unprecedented step of announcing to the market that it would be able to meet its rent payments today. This positive news led to a 40% rise in their share price.
Top Tips
- Don’t suffer in silence - it’s in everyone’s interests for your business to survive these tough times.
- Approach your landlord for concessions as soon as possible - whether you need them or not.
- Get early legal advice - the sooner you know the full extent of your obligations the sooner you can start negotiating for a better deal.
If you’re a landlord or a tenant who needs advice on a missed rent payment or planning and negotiating your next quarterly rent payments SA Law’s Commercial Property and Property Litigation teams would be glad to assist. Please feel free to contact us by telephone on 01727 79800 or by email.
© SA LAW 2009
Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them. You are recommended to obtain specific advice in respect of individual cases.