Operator fears “staggering” number of leases could fail without intervention
AN Edinburgh bar owner has called on the Scottish Government to provide greater protection for commercial tenants amid concerns of a “staggering” number of failed leases in the coming months.
John Stamp, owner of the Makars Gourmet Mash Bar in Edinburgh’s Old Town, has called on the government to introduce an amendment to the Coronavirus Act which would require commercial landlords to reduce rent for a period of time after premises are allowed to reopen. Stamp said this could be done in such a way that the landlord continues to make a profit while also protecting tenancies.
Last year the Scottish Government introduced, as part of the Coronavirus Act, legislation to delay the eviction of commercial tenants. Ordinarily, the law requires a 14-day notice period for evictions under ‘irritancy clauses’. The legislation extended this period to 14 weeks, with the measures due to expire on 31st March.
Stamp said, once this happens, he expects a “staggering” number of leases to fail.
“Most independent operators will be required to give a personal guarantee on the lease,” said Stamp.
“These guarantees were given under the premise that we would at least be able to trade in normal circumstances. Because of these, it is in the landlord’s interest for the tenant to fail.
“The landlord collects the personal guarantee in one sum (usually from the tenant’s house sale) and further benefits from a new lease premium on a property that has a lifetime of investment in.
“These premiums will be huge come May 2021.”
Kate Nicholls, chief executive of UK Hospitality, said rent debt “looks like it may be a destructive and enduring legacy of COVID” and called on the Scottish and UK Governments to “find a solution which is equitable for tenants and landlords”.
“In the immediate term it is essential that protection on irritation is extended beyond 31st March,” said Nicholls.
“In the longer term we have urged the government to act and we have suggested setting an advisory level for rent forgiveness for closed businesses of 50%, reasonable repayment terms and the introduction of government-backed bonds to help fund this solution.”
When approached for comment by SLTN the Scottish Government said it is “giving active consideration to extending the anti-irritancy provisions for a further six months after 31st March”.
“This option is available under the Coronavirus (Scotland) Act through a Scottish Statutory Instrument and would be subject to parliamentary approval,” said a spokeswoman.
However, the government has “no plans” to compel commercial landlords to reduce their rent, said the spokeswoman.
“There are no plans to legislate for what are contractual arrangements between landlord and tenant where various individual circumstances will apply,” she said.
“However, the Scottish Government strongly endorses the Code of Practice for the commercial property sector and expect landlords and tenants to come together to arrive at a mutually beneficial agreement through rent deferments, holidays, reductions and lease restructuring where appropriate.
“The code’s principles are supported by many representative bodies including the British Beer and Pub Association and UK Hospitality.”
The code of practice was introduced by the UK Government but is voluntary.
