A New Look for commercial rents?
min readLast week brought yet further bad news for landlords of commercial property:
• Both the forfeiture moratorium and the restrictions on CRAR were extended to the end of the year, which means that many landlords will have to incur costs on court proceedings or other routes for recovery where they have tenants still refusing to engage in discussions about their arrears position.
• In addition to this, high street retailer New Look announced that it had won approval from its creditors - via a company voluntary arrangement - for 400 of its store rents to be linked to turnover.
New Look's decision to link its turnover rent proposal to a CVA was criticised by the British Property Federation, but its success may well encourage other retailers to try to follow a similar approach.
It seems likely that this is just the start of yet another challenging period for landlords; even where tenants' businesses survive the current crisis, tougher negotiations over the terms of new leases are on the horizon. With lease renewals under the Landlord and Tenant Act 1954, there is conflicting case-law as to whether the courts have jurisdiction to order a turnover rent. However, market evidence is likely to be important in such cases and so landlords who agree turnover rent arrangements with their tenants - even if intended to be temporary - need to bear in mind that they may be looking at a future with very different rent arrangements for the longer term also.
"We support this rescue culture, but today's result clearly demonstrates how the process is now wrongfully being used as a weapon by businesses to rip up leases permanently."
