Hospitality chiefs have issued a fresh plea to ministers to help ease the financial crisis facing the sector by forcing landlords to waive at least half the rent they were owed during operators’ enforced closure.
Sky News has seen a letter from Kate Nicholls, UK Hospitality’s chief executive, to the business and communities secretaries in which she urges a fundamental overhaul of the commercial property sector’s expectations of tenants amid continuing fears about hundreds of thousands of job losses during the coronavirus pandemic.
In the letter to Alok Sharma and Robert Jenrick, Ms Nicholls calls for a series of rent-related measures to prevent “mass redundancies, business failures and permanent scarring of Britain’s high streets”.
She highlighted the chancellor’s decision to delay the job retention bonus (JRB) as a factor in deepening the industry’s problems.
“The loss of the JRB compounds the biggest financial issue that hospitality businesses face: the accumulation of rent debt since March and the disequilibrium between rental levels and what hospitality businesses can pay in the short- and medium-term.
“This loss cannot be overstated in terms of the rent debt as it dramatically affects cashflow and the ability to pay landlords,” Ms Nicholls wrote.
The trade body’s latest intervention comes despite growing optimism about the delivery of a COVID-19 vaccine during the coming months, with social distancing likely to remain a feature of reopened hospitality businesses for some time.
Ms Nicholls urged the government to extend its debt enforcement moratoria until the middle of next year, accompanied by an obligation for tenants outside the nightclub sector – which has been closed since March – to pay at least 20% of their rent debt.
Ministers should also outline an expectation for landlords to forgive at least half of rent debt for periods when businesses were forced to close.
“This could be supported by tax reliefs for landlords [with] tax relief contingent on agreeing a rental agreement for at least the next financial year,” Ms Nicholls said.
She added that tenants should make “a reasonable offer of rent debt payment…over a reasonable ‘time to pay’ set out in the Code of Practice”.
The hospitality industry chief also called for the introduction of ten-year low-cost government-backed property bonds for tenants seeking to meet minimum payment thresholds but without the means to do so.
A reset rent review enforced by a new legal mechanism is also essential, according to Ms Nicholls, who said it was “important that rent reviews are independent and reflect the contemporary market”.
Tenants should be given the right to invoke a break clause in their leases next June, with half of their rent debt written off, she added.
Ms Nicholls’ other request was for the go-ahead for a long-term review of the commercial property sector.
“The pandemic has further highlighted some of the longer-term, structural issues that afflict the property market,” she wrote.
“The government should instigate a review to consider Upward Only Rent Reviews, RPI increases in contracts, the lack of formal concession clauses or temporary frustration in law, amongst other issues.”
Industry bosses have warned for months about the growing crisis in rent debt, with little sign of progress in discussions with commercial property-owners.
Some landlords, such as the Grosvenor Estate, have sought to alleviate the problem by funding an extension to the Eat Out to Help Out scheme themselves, but many have refused to budge.
Restaurant chains including Carluccio’s, Chiquito’s and Byron have been forced to call in administrators since the pandemic began.