By Claire West
This weekend is the next deadline for quarterly rent payments, where three months rent is paid in advance for commercial properties.
Recent research by R3 shows that 18% of businesses in the retail sector are struggling to pay their debts as they fall due, indicating that this quarter’s rent day could be the final straw for some.
JJB Sports recently filed a notice of intention to appoint administrators and is not the first retailer to have struggled in advance the rent day. Game Group also filed a notice of intention to appoint before March’s quarter day.
Lee Manning, R3 President, comments:
“The retail sector is under enormous strain and the quarterly rent payment represents a significant outgoing for retail businesses. Many leases will have been set up a long time ago, and in today’s economic climate, are not sustainable. Businesses are looking into ways to manage their cash flow more effectively, and are attempting to pay rent on a monthly basis or even negotiating turnover linked rents dependent on future performance.
“It is vital that businesses are given all the support they need to survive this challenging environment where consumer demand is still at a low. This means that landlords need to be more flexible with the recovery of rent, but also that businesses that are concerned about their cash flow seek advice early.
“Whilst a CVA can be a workable remedy, engagement with landlords at an earlier stage can often avoid a more costly insolvency process.
“The quirks of recent case law (Goldacre and Luminar Leisure) have left a horribly inequitable position for both landlords and administrators depending on the precise timing of an administration.
“We are calling for greater clarity surrounding the issue of rent due in the event of an administration; whether it counts as an expense and over what period. The uncertainty of the cost of trading a company in administration is driving approximately 1,200 businesses a year into liquidation and hampering company rescue. We need to go back to a pay-for-what-you-use approach, which is fair to everyone. The law needs to be changed in order to support business rescue in the UK.”