Captain’s Blog – Landlord v Tenant

Much is made by landlords of the inequity of tenants using current COVID measures to avoid paying rent. Initially lease forfeiture and subsequently the ability to issue statutory demands for non-payment of rent have been removed from the landlords armoury by the Government as it seeks to keep a lid on the fallout from COVID-19’s attack on the economy. The high street was an early victim of the lockdown followed closely by hotels and leisure outlets. Some tenants using the Governments guidelines – so the argument goes – could and should have paid rent when they chose not to. Under particular attack is Travel Lodge which is owned by the oft derided “Private Equity” world. The chain decided to withhold rent on the basis that they couldn’t open their hotels because of COVID restrictions imposed by the Government. Fair enough some say. Others argue however that because they are owned by companies which have stripped the chain of cash by financial engineering leaving a threadbare balance sheet they should replenish it and cough up. Who cares? Well, here’s the interesting argument. We all should at least when it comes to property generally. Property is a major asset class and store of wealth into which most pension funds and investment houses invest. As most of us have a pension or some form of investment by way of SIPP, SASS or other instrument, we all own commercial property or have exposure to it. If the tenant stops paying the landlord suffers and so in the long run does your pension. If the landlord defaults on his loan the banks suffer and when they do, some of that pain is passed onto the public. In some cases of course the public do own the bank and in the case of others they do so by way of pension investment through the stock market and so it goes around.

What should be done? It seems clear that post lockdown at least some businesses wont re-open. Those that do and have enjoyed a rental holiday will suddenly find themselves with up to six months of arrears and with future trading thin, probably no means to re-pay. Ongoing bills will be struggle let alone dealing with old debt. One tenant (who is also a landlord in some locations) has a proposal and that is a three way split between landlord, tenant and Government. Roger Wade, the founder of leisure outfit Boxpark put forward his view in Property Week saying that unless the three parties each accept a third of the financial burden we are on a collision course to Armageddon. It remains to be seen whether that happens or whether the traditional landlord tenant standoff will hold. I hope that some accommodation can be reached but I’m not overly optimistic that it will. In these days of Big Government I fear that legislation will be introduced which further erodes the free market for better or for worse.