Commercial property landlords are starting to tighten the screw on retailers including Boots and Matalan for failing to pay overdue rent, in some cases starting legal action to reclaim money they are owed.
Boots, which has continued to trade throughout the lockdown, has been criticised with other businesses, including Travelodge, for refusing to pay second quarter rent, which was due at the end of March.
The high street chemist, which is part of the global chain Walgreen Boots Alliance, is classed as an essential retailer, meaning the majority of its 2,500 stores remain open. It will also benefit from the UK government’s decision to scrap business rates for retail, leisure and hospitality firms for the rest of the year.Advertisement
“It’s a disgrace,” said the chief executive of one of Boots’ landlords, a listed real estate investment trust. “We are trying to support the little guy, the small independent traders whose sole income is through the cash register. I said to Boots, my ability to help those people is directly related to the people who could and should pay rent, paying that rent.”
Boots confirmed that the company had “paused some payments”. A spokesperson said the company had contacted some of its larger commercial landlords “to discuss options for rental and service charge payments in light of the Covid-19 pandemic and its impact on our business”.
The British government has allowed commercial tenants to delay rental payments for three months without fear of eviction, as part of measures to support business during the crisis.
But landlords are furious that some tenants, which remain open and trading, are exploiting the situation and are increasingly turning to legal action.
The fashion and homeware retailer Matalan was issued with a winding-up petition – a legal notice usually sent by a creditor to request that the courts close a company that owes it money – by a landlord when it failed to pay rent owed.
The retailer, which was founded by the billionaire John Hargreaves and is still owned by the Hargreaves family, has since settled with the landlord.
Secure Income REIT, a real estate investment trust that owns 123 of the Travelodge chain’s 580 hotels, said the group’s overdue rent accounted for 6% of its annual rental income. It had “reluctantly initiated actions” against the hotel chain to recoup the cash.
The £1.4bn property investment group, which also owns the theme parks Alton Towers and Thorpe Park, said the hotel chain had recently reported record profits and “is owned by large, multinational investment businesses in Goldman Sachs, Avenue Capital and GoldenTree”.
Another landlord, a property and investment managment company, said it was currently “investigating all legal routes” to recoup money owed by three other high street chains.
Burger King, which has 500 restuarants, is also declining to pay its rent. Its chief executive, Alasdair Murdoch, told BBC Radio 4 on Tuesday that he was backing a campaign, called #NationalTimeOut, for hospitality businesses to be offered a nine-month rent deferment, where landlords would extend leases and get their rents paid when businesses had recovered from the lockdown.Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
Others backing the campaign include Wahaca, Nandos and the Gordon Ramsey restaurant group.
Germany’s justice minister has warned large, financially stable companies against withholding rent, describing such behaviour as “obscene and unacceptable”.
Few UK landlords expect similar government intervention. Many say they are willing to share the burden, accepting part payments and deferments, but not straight refusals to pay.
“To just put two fingers up and say we aren’t paying anything isn’t fair,” said one landlord. “It’s unacceptable to watch some of these big corporates, owned by very wealthy people and private equity, not pulling their weight.”