Landlords criticised over inflexible rents

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Retailers will on Monday criticise their landlords for failing to deliver on promised rent reform in spite of continued problems for many operating in difficult trading conditions.

Only one in eight leases are now paid on monthly terms, according to the British Retail Consortium. A switch to that payment schedule was a key request by retailers earlier this year, when they argued that the obligation to pay rent quarterly and in advance could be burdensome particularly during a recession.

However following a survey of its members, the BRC, which represents the retail industry, will on Monday say that just 12 per cent of retail property leases are now on monthly rental terms. Nearly 90 per cent of retailers that responded said they had been or would be penalised with higher charges to move to monthly terms. Two-fifths said the agreements were just on a temporary basis – typically a year. There were 19 medium- and large-sized retailers in the survey.

However, there were signs of encouragement on new leases, with the survey showing that two-thirds of new leases since January 2008 had included monthly payment terms. But, the BRC added, commercial landlords had a long way to go before they achieved this degree of flexibility on existing leases.

The British Property Federation, which represents the UK’s landlords, criticised the survey, saying that it failed to explain that many landlords had also to take account of shareholders and pensioners who relied on the income generated by rents, and that bankers needed to give permission for switching from quarterly to monthly terms under debt agreements.

Liz Peace, chief executive of the BPF, said: “What this recession has shown is that where landlords and occupiers are willing to engage in dialogue, the best results can be achieved and it is disappointing therefore when one side acts unilaterally like this.

“The retail sector is not the only one that has suffered during the recession. Indeed, the British Retail Consortium’s remarks are extremely ill-timed bearing in mind the Bank of England’s analysis last week that failure of the commercial property sector was one of the key remaining threats to the country’s financial stability.”

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