With 14 Days Until Rent Is Due, Restaurants Are in Limbo

London’s restaurants are worried about rent. They’ve been worried about rent since the novel coronavirus pandemic locked down the U.K. and closed them down; they’ve been worried about rent since they were allowed to reopen; and they’ve been worried about rent throughout the summer glow of ‘Eat Out to Help Out.’ Right now, rent is due in 14 days, and the government is yet to decisively intervene on what happens next. London’s restaurants are worried about rent.

There is currently a lease forfeiture moratorium in place, introduced by the government in March and running out 30 September. The moratorium protects restaurants from evictions, provided that those evictions would be prompted by the impact of the novel coronavirus. Its ultimate effect is to delay rent payments, not to cancel them, or to write them off.

This is what is so concerning to restaurants: With no decisive intervention from the government, they fear that landlords will be legally able to not just claim the next quarterly payment, due on 29 September, but also back-rent, leaving them with a massive bill for a period in which they were forced to close. Such a bill would be terminal for huge numbers of operators, with many London restaurants having been forced to close already.

This is what leads operators, and industry bodies like U.K. Hospitality, to call for an extension to the lease forfeiture moratorium. Prevent evictions until March 2021; prevent rent payments. But this buys restaurants negotiation time, not money, and its positive impact is predicated on an economic recovery — in simple terms, more people going to restaurants, more often — and on productive negotiations in the time bought. Both of those are far from certain. The negative corollary to this is that it simply kicks the can down the road, and March 2021 would bring the restaurant “bloodbath” that U.K. Hospitality predicts without further government intervention. But that’s currently what the government is planning, with the Financial Times reporting that a new, undefined extension is firmly on the cards.

As commercial property specialist Adam Walford of law firm Howard Kennedy explains, the government has not formally sided with either tenant or landlord on the basis that it is a public entity and the bargain at hand is a private one. It is yet to take a position on what should happen with unpaid rent, and it likely never will. It’s also important to remember that tenants and landlords alike are almost never independent decision makers: debt’s tentacles are long and individual interests are often tied to external debts, with a bank, or an investor.

This leaves an extendable impasse, which will, eventually, bankrupt one party or the other. The British Property Foundation supports the introduction of government rent grants for restaurants, with chief executive Melanie Leech claiming that “well-financed businesses have been exploiting the government intervention to avoid paying rent, when they are indeed able to pay, and this puts at risk our sector’s ability to support vulnerable tenants.”

An unlikely party in the current lobbying of the government is turquoise restaurant delivery juggernaut Deliveroo, which needs restaurants from which it can take commission to even exist as a business proposition. It, in conjunction with some of the U.K.’s largest — and therefore most powerful but also more immune — restaurant groups, suggests that the government needs to intervene on back-rent by capping the amount landlords can requisition. Its current proposal is 10 percent. But that decision, however sensible, would represent the government taking a position and a side: something it has been singularly unwilling to do so far.

Any rent measures also need to be taken in step with further costs. Rent is the biggest existential threat to restaurants, and staff costs are frequently the next biggest. With Labour reportedly set to pressure the government by proposing an alternative to the furlough scheme that allows targeted support for either businesses least able to trade or areas affected by local lockdowns, there may be a dual support in the offing.

Restaurateurs have long said that eviction protections are not a solution to their problems, because the negotiations are based on mutually exclusive interest: landlords need money that restaurants cannot pay. That’s the impasse, it’s been that way for months, and it will continue to be that way until dining rooms are able to return to capacity, which won’t happen until a vaccine is available. The government’s faith in people reaching individual accords is cute, but it’s not and never will be a systemic solution: the only thing that will be decisive has to come from Westminster. For now, restaurants must wait.

• U.K. set to extend ban on evictions of commercial property tenants [Financial Times]
• When Rent Is Due, How Will Restaurants Pay? [ELDN]
• The Biggest Existential Threat to Restaurants Remains Unresolved [ELDN]