The only way to Give Hospitality a Break is for the government to offer binding adjudication
By Anthony Lorenz
The call for evidence on the commercial rent eviction moratorium closed on the 4th May. After more than a year of unpaid rent, financial insecurity, and numerous lockdowns, the government will now consider the evidence, and try to find a way out of the moratorium that will suit both landlords and tenants.
That’s why it’s essential that the government gets their next steps right: after all, their decision will have decades-long ramifications for the hospitality and leisure sectors, with tens of thousands of jobs on the line.
In their call-for-evidence, the government outlined six potential options that are available when the moratorium comes to an end on June 30th.
These range from allowing all government support measures to expire on June 30th, with no replacement, through to a targeted extension of the moratorium and other support mechanisms.
Finally, the government is offering binding adjudication: an opportunity for landlords and tenants to take a seat at the table, so to speak, and resolve their problems between themselves.
This is my preferred option.
Viability for both parties
After all, something has to be put in place before the moratorium ends.
Any tenant who hasn’t already agreed terms with their landlord is going to owe over a year’s rent the day it ends, on top of the pre-COVID 19 rent payable.
And while the majority of tenants and landlords have responded to this unprecedented period wisely, agreeing reductions in rent owed, and extending payment terms in order to ensure the long-term viability of tenant businesses, some landlords have not entered into any meaningful discussion with their tenants.
Some landlords are even continuing to charge interest on rental periods that are covered by the provisions of the eviction moratorium, from March 2020 onwards, which is against the spirit of the moratorium, if not the letter of the law.
The introduction of binding adjudication is, to my mind, the only way to resolve these challenges.
It provides tenants and landlords with much needed certainty. Critically, it also keeps to the Government’s commitment not to extend the moratorium indefinitely, by providing a mechanism for landlords and tenants to resolve any impasse in negotiations.
No one-size-fits-all solution
One of the other major advantages to adjudication is that it acknowledges that there will be no one-size-fits-all approach to resolving disagreements between landlords and tenants.
Mediation means that individual circumstances can be taken into account.
The other options, such as targeting existing measures on sectors disproportionately affected by the pandemic, leaves too much room for arbitrary decisions which could damage entire sectors of the economy.
This is a moment where nuance, understanding and flexibility is needed, more than anything else.
Give hospitality a break
For the hospitality and leisure sectors, this kind of action is essential.
Otherwise, there is a risk that some unscrupulous landlords would demand the full back rent as soon as the moratorium is lifted: an action which would inevitably lead to mass winding up orders, bankruptcies, and major disruption to the UK hospitality sector.
The government has to give hospitality a break, and it can do so through getting all interested parties sat down around a table, working things out together.
That’s how the hospitality sector will get through this ongoing crisis and improve trading conditions in the months and years to come.
We are grateful to Tony Lorenz for this article. Tony Lorenz is a boutique property consultant, and the founder of the Lorenz Consultancy. One of the best-known names in the London property market, he has 55 years of experience working with hospitality and leisure clients.