The vexed issue of rent in the hospitality sector – time to have your say

Operators in the hospitality sector have been one of the hardest hit during the pandemic, with numerous national lockdowns and local tiered restrictions disrupting trade.

Even for those able to innovate and adapt, trading has been a disaster, despite the support measures introduced by the government. The objective has been to survive. Unfortunately, many have not.

The single biggest issue for operators, and by extension their landlords, has been rent. Last month, UKHospitality flagged that “a £2bn millstone” in rent arrears still faces operators.

We have seen operators and landlords respond positively to this vexed issue, in the spirit of the voluntary Code of Practice introduced in June 2020. Many landlords have supported their tenants and agreed rent concessions, including rent waivers, deferments, rent reductions and the introduction of turnover rents. In exchange, tenants, where possible, have agreed to re-gear leases, by removing break clauses or extending the term.

However, a significant number of landlords and tenants have not been able to reach an amicable resolution and a tipping point is fast approaching, with the various moratoria and restrictions on rent collection scheduled to end on 30 June 2021.

The government has not decided how the various moratoria and restrictions will be lifted and has launched a consultation in the form of the Commercial Rents and COVID-19 Call for Evidence. The government wants to understand how landlords and tenants have responded to the rent issue and the extent of the problem, in order to inform how it exits the existing measures.

The options under consideration are:

  • Option 1 – Allow the existing measures to expire on 30 June 2021;
  • Option 2 – Allow the moratorium on commercial lease forfeiture to lapse on 30 June 2021 but retain the insolvency measures and additional rent arrears amendments to CRAR for a period of time;
  • Option 3 – Target existing measures to businesses, based on the impact that COVID restrictions have had on their businesses for a limited period of time;
  • Option 4 – Encourage increased formal mediation between landlords and tenants;
  • Option 5 – Non-binding adjudication between landlords and tenants; and
  • Option 6 – Binding non-judicial adjudication between landlords and tenants.

The consultation ends on 4 May 2021 and I would encourage landlords and tenants alike to respond and shape the way forward on this vexed issue.

If you would like to discuss anything covered in this Blog, please get in touch with Director, Adam Boyd.

The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.