Protecting Restaurants From Eviction Is ‘Not a Solution’ to Their Problems

The government has announced that commercial landlords will be prevented from using tactics designed to intimidate tenants unable to pay rent because of COVID-19. Business secretary Alok Sharma confirmed that rent enforcement actions such as winding-up orders and statutory demands would be “temporarily voided,” meaning that restaurants in financial difficulty will not be evicted or forced to shut down their business.

The announcement means that landlords are temporarily denied two formal means by which they can issue threats to tenants who have failed to meet their rental obligations. Though this is not the “enforcement moratorium” that many in the restaurant industry have called for — and the government still places emphasis on the need for “collaboration” — it partially redresses the balance of power in what are going to be significant and case-specific negotiations between landlords and restaurateurs. The government is seeing what it can do without meddling too much, hoping that measures like this will aid constructive and mutually beneficial outcomes.

Trade body chief executive Kate Nicholls of UK Hospitality said it was “helpful and pragmatic” and provided “breathing room.” For many in the restaurant industry, however, much more is still needed — with the government’s approach to-date coming off overly optimistic. They believe it is placing too much trust in individuals whose commercial interests are necessarily opposed to reach workable agreements.

Chef, restaurateur, and author Yotam Ottolenghi, who has been among the most vocal about the need for government intervention and a long-term rent break for restaurants, told Eater that despite being “a very welcome step,” the latest announcement falls short of what the industry needs and has sought.

“It’s not the debt enforcement moratorium that many have asked for but it definitely puts restaurants in a better position vis a vis aggressive landlords,” he said. Noting that this is an important move, he also emphasised that it is comparatively minor in the overall picture. “I’d love to see the 9-month rent free requested under #NationalTimeOut proposal to be adopted,” he added in reference to the proposal set out by pressure group Hospitality Union this week, which last night received the backing of author Nigella Lawson. “This will give restaurants a fighting chance once we can re-open,” Ottolenghi said.

Another advocate of a more far-reaching set of government measures, JKS Restaurants — whose interests include Michelin-starred Indian restaurants Gymkhana and Trishna, Taiwanese restaurants Bao, and Sri Lankan specialists Hoppers — yesterday reiterated its support for the nine-month rent holiday, announcing on Instagram that without continued support and bold measures, the future of the industry and two million jobs were under threat. The restaurant group’s chief executive Jyotin Sethi described the rent enforcement pledge from the government to Eater as “good news but only part of the solution that the industry needs.”

Mandy Yin, founder of Holloway Road Malaysian restaurants Sambal Shiok and Nasi Economy Rice, said there was something to be taken from the line in the announcement which states “companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic” — what breathing room means in practice and its implications in the immediate-term. “[It] certainly gives me the strength to only pay 50 percent rent due [today] on both sites,” she said.

But Yin is also wary of the extent of the measures: “The announcement is a halfway house — the main thing is that rent is still due,” and the tenant remains burdened with that liability. “We still need a National Time Out, otherwise we will keep having to pay money out when we have literally nothing coming in.”

She also reiterated the need for government measures to be comprehensive and offer support for landlords as well as tenants: “The landlords must be given relief too from their mortgage holding banks. And that must come from the government. This will then allow landlords to forego rent for the few corresponding months.”

Being able to acknowledge and navigate the impact on both sides of the bargain is what this announcement is designed to achieve, according to commercial property specialist Adam Walford at Howard Kennedy, who represents a number of restaurant operators and landlords in central London.

“In an ideal world, the government needs to find a way to bankroll it all,” he said. But the reality of a recession post-crisis means that it was unrealistic to think of policy makers as “knights in shining armour” capable of a comprehensive bail-out without major pain for all parties later. He didn’t doubt the government’s ability or eventual willingness to do more, but recognised the logic in the extent to their intervention to date. “They’re definitely listening,” Walford said. “The risk with cutting to the chase is getting the decision wrong.”

“There needs to be realism in the negotiation,” he added, noting that from a legal perspective, the terms of any agreement are between landlord and tenant. “Never has that relationship been more important.” Walford said it was similarly important to note Sharma’s wording — that while the Business Secretary was aiming to curb the “minority” of landlords using aggressive tactics, he was urging all “to show forbearance to their tenants.”

David Abramson, chief executive of property agent Cedar Dean, agreed that this was key in ensuring constructive negotiations but cautioned that “landlords suggesting deferrals [as opposed to suspensions] are simply kicking the can down the road and burying their head in the sand.” Without denying it was critical in the short-term, he also said that all parties need to look beyond the proposals which have focused on relief policies for the next 12 months. “The real issue is about rents coming down over the next two / three years — probably by as much 50 percent in some cases to adjust to the likely new reality of turnover dropping substantially.”

Likewise, there are restaurateurs who remain sanguine about an over-reliance on goodwill and are doubtful of a genuine resolution without sufficient intervention. Darjeeling Express founder and Chef’s Table star Asma Khan was clear the government’s latest move was “not a solution.”

“From all the comments — explicit and implicit being made in the [government’s] daily press conference — the presumption is that restaurants and bars will open last. Delaying evictions with a mounting rent bill is not a solution. It just delays the inevitable.”

• Restaurant Industry Asks Government for 9-Month Rent Holiday to Stay Afloat [ELDN]
• Hospitality Industry Wants Government Support Until Business Back to ‘Full Strength’ [ELDN]
• Social Distancing Until End of Year ‘Catastrophic’ for Restaurants [ELDN]
• Restaurants Need a Phased Reopening Plan to Avoid Devastating ‘Yo-Yo’ Effect [ELDN]