Paying for and starting to recoup for the past 12 months – The ongoing commercial property dilemma

28 April 2021

Author: Darren Toombs
Practice Area: Commercial Law, Real Estate

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With the re-opening of non-essential retail this weekend and the limited re-opening of licensed premises, we will start to see the hens come home to roost on numerous deals cut across the commercial property rental sector over the past 13 months.

I have spent a considerable portion of the past year and more advising both tenants and landlords on the best way forward given the hugely challenging trading conditions resulting from the COVID-19 lockdowns. I had previously published an article on the need for landlords and tenants, licensees and licence holders to play fair albeit with governmental policy and restrictions acting as a referee on the side.

I suspect that within the next month or two many deferred repayment agreements will kick in for tenants and in the not too distant future, short term deals on rent reductions will come to an end. For the next few months governmental protection on forfeiture will remain as will the practical inability for creditors to enforce against debtors with mechanisms which actually bite. We are fast approaching the “proof in the pudding” as regards the effectiveness or otherwise of the policies put in place to protect the retail and entertainment sector.

On the positive side we have seen retailers diversify and “click and collect” a phrase none of us were aware of five years ago is now common parlance. You only have to look at the streets around Belfast to see the outside spaces being transformed into beer gardens and outside bar and café areas ready for the weekend. There does appear to have been real investment and a positive use of COVID financial support and grants by those thinking outside the box. Local Councils have been forward thinking and plans have been fast tracked to create pedestrian only areas, including around Blackstaff Square, enabling outside entertainment spaces in the run-up to summer.

While we have all of these positive notes to offer encouragement, from my own practice I am all too aware that the noises are not exclusively positive. I know of numerous cases of tenants who have buried their heads in the sand, failing to acknowledge mounting debt and standing behind the protective legislation. I am aware of landlords who are struggling to meet their own commitments due to non-payment by those who occupy their properties. The press has also reported this week how thousands of jobs have been lost in the hotel and hospitality sector.

I have no doubt that the bounce of the next few weeks will offer encouragement. Whether or not enough has been done to prevent a collapse remains to be seen. Undoubtedly restructuring plans which were placed on hold on a “wait and see” basis, will now be dusted off and re-evaluated. What is clear though is that the flow of money which keeps everything moving and which has been switched off for so long is about to start again. Will it be sufficient to allow the business to operate? Will it be sufficient to meet the deferred payments and repayment plans? Will something much more fundamental need to occur within businesses to rid themselves of the past 13 months debt burden built up?

I fully expect to spend the next year assisting those on both sides of the equation with the issues that have arisen. Supporting landlord clients in ensuring payments are made as promised, which will probably (and unfortunately) include taking steps to require tenants with no viable business to remove themselves from premises. I will also be assisting troubled tenants to ensure that they have a viable business going forward or advise them on taking steps to make the business viable once they are more relieved of its debt burden if at all possible.

Although it is impossible to predict all that will transpire, it is clear that these next few weeks mark a pivotal point for this sector.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.

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