The business evictions ban was extended to 30 June, but rent debt is still growing.
Two-thirds of retailers face legal action once the moratorium ends in July according to the British Retail Consortium. BRC said pandemic has left retailers with £2.9 billion in accumulated rent debts and without action, the end of the moratorium could see thousands of shops close.
Kate Nicholls, chief executive of UKHospitality, also said in the hospitality sector 40 per cent of businesses had not reached an agreement on rent arrears.
Last March the Government announced a further extension to protect commercial property tenants until the end of June 2021, but thousands of businesses are struggling to pay their rent. The extension is intended to give commercial landlords and tenants more time to come to an agreement on unpaid rent.
In response to the issue, the Government held a consultation with affected parties until 4 May, 2021, to better understand the risk posed by accumulated rent debts to economic recovery, as well as how tenants and landlords are adjusting their present lease terms to address the situation. Evidence collected will go towards future policies around leaving existing measures behind, and any additional actions to protect jobs and businesses.
However, retail rent debt is expected to reach £7bn by the end of June, after months of government protection against eviction and rent debt enforcement, according to Remit Consulting.
Between March 2020 and the end of last year, the retail sector’s debt climbed to £2.2bn, making up more than half of commercial tenants’ total debt of £4.2bn.
The British Property Federation also estimates total unpaid rent for UK rent for commercial property from the end of March until December comes to £4.5bn.
British Property Federation CEO Melanie Leech claimed the latest figures showed it was “more important than ever businesses that can afford to pay, but have exploited the moratorium and avoided payment, now pay their debt”.
Business owners affected by the pandemic are still under protection from eviction until the end of June 2021.
The restriction on landlords using Commercial Rent Arrears Recovery (CRAR) to recover unpaid rent will also automatically extend, in line with the moratorium’s expiry date. This allows businesses breathing space to pay rent owed.
The move is also intended to support businesses worst affected by the pandemic, such as cafes and restaurants, helping them to rebuild. This is in addition to putting in place one of the world’s most comprehensive economic responses to protect jobs and incomes throughout and beyond the pandemic.
“The UK government should take a role in sorting the rent issue out”
However, the rent crisis has caused immense difficulties for many business owners. Mr Onder Sahan, one of London’s most influential Turkish and kebab restaurateurs, is among those affected. The head chef and founder of the Tas Restaurant chain, Mr Sahan has opened fourteen restaurants around central London since 1999. Hazev in Canary Wharf, is his most recently established restaurant, a co-venture with another the chain of four Haz Restaurants in London. He is also a driving force behind the Docklands Academy, a London-based educational institution that aims to provide affordable and quality training for the food industry and other sectors.
Mr Sahan told BritShish: “All of our businesses are in the regions where financial centers are located. Due to the pandemic, thousands of people were away from their jobs due to working from home. Unfortunately, our work was not suitable for delivery. We could not open many of our branches due to the low number of residents and the number of tourists in the regions we are in. At this point, I would like to state that I have a complaint due to the high commission rates of delivery companies. Unfortunately, even though our landlords offer a little discount, it seems difficult for us to cover the rents. In other hand, especially for businesses in city centers, the grants provided by the government is far from cover the rents. It is unlikely to solve the commercial rent debt crisis without further intervention recognising London’s higher property values.”
UK Hospitality, a lobby group representing Britain’s hospitality sector echoes Mr Sahan’s concerns around rent, shared by many others. The organisation’s CEO Kate Nicholls has said: “If businesses have no means of generating revenue and they have no savings left, there is nowhere for them to go,” adding that “Premises are closed, but bills continue to go out. Rent debt is piling up for some businesses, and we have heard that some are struggling to access loans and grants. The result is going to be more business failures and even more jobs lost.”