Tenants across both residential and commercial property paid less than half the rent they owed on the most recent payment day, underscoring the financial pressure coronavirus is piling on UK renters and businesses.
Just 48 per cent of tenants paid on time and in full on the latest rent day, which for commercial tenants was March 25 and which varies for residential contracts, according to data compiled by Remit Consulting from six leading property management companies covering close to 80,000 leases.
With shops and offices closed, and thousands of employees furloughed nationwide, many have decided to hold on to cash rather than pay rent, a move that has triggered disputes between landlords and tenants in the past fortnight.
Retail landlords, whose tenants have mostly been forced to close as a result of the pandemic, took 41 per cent of rents. Residential landlords fared little better, taking 44 per cent of what they were due.
“These figures are likely to make uncomfortable reading for landlords, asset managers and investors,” said Steph Yates, a senior consultant at Remit Consulting.
Even office tenants, for whom the pressure is less acute compared with those in retail or hospitality businesses, paid just 57 per cent of the total due. In 2019, 79 per cent of rent across all sectors was received on time, rising to 90 per cent a week later. After a week, 2020’s figure was still only 57 per cent.
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The rapid spread of coronavirus has caught both tenants and landlords off-guard and led to confusion, and in some cases conflict, about what is owed and when. Both commercial and residential tenants have been protected from eviction until June by government interventions, although they are contractually obliged to pay their rent.
But many tenants, particularly business owners forced to shutter their shops and residential tenants whose work has dried up, have found themselves simply unable to pay.
Landlords have been encouraged to reach an accommodation with those tenants, and have typically offered rent deferrals, changes to payment schedules, or outright rent holidays.
But some complain that tenants capable of paying are exploiting the situation in order to avoid doing so.
“There are some [commercial] tenants seeking to take advantage of the current situation . . . using that as an opportunity to negotiate a better position and a reduction in rent,” said Angela Kearns, a partner in the real estate practice at law firm Clifford Chance.
Some commercial landlords have refused to offer concessions to tenants, instead threatening to take them to court if they fail to pay up. Criterion Capital, owner of the Trocadero centre in London’s West End, has written to tenants demanding full payment, which it said it needs to meet its own obligations to lenders.
It was only targeting those businesses on its estate with strong enough balance sheets to pay, “but have chosen to blatantly use the government’s coronavirus bill as an excuse to withhold paying rent,” it said.