London Restaurants May Finally Get Some Help from the Government With Rent Debt

The government is readying itself for action to break the deadlock between landlords and hospitality business owners over the estimated £3 billion of rent debt accumulated over the course of the COVID-19 pandemic.

According to a report in the Telegraph, ministers are “weighing up” a new plan to prevent landlords from evicting pub and restaurant tenants for failing to pay rent when the current legal ban on evictions expires at the end of June. Throughout the course of the past 15 months, rent has been by far the issue that presented the greatest existential threat to hospitality businesses in the capital — in part because no national solution had been put forward by the government.

The so-called “lease forfeiture moratorium” — the ban on evictions because of unpaid rent during the pandemic — was designed to enable tenant and landlord to negotiate rent agreements without one party having a much stronger negotiating hand; it has been repeatedly extended throughout the course of the pandemic as restrictions have been either extended or reintroduced and resultantly impacted tenants’ ability to pay rent. Most recently, it was extended in March until the end of June 2021.

At the same time, the government issued a “call for evidence” where that moratorium (and the accompany “code of conduct”) had not worked, despite tenants, landlords, and their representatives having told ministers that more needed to be done for over a year. Now, finally, policy makers are considering interjecting in a way it has avoided doing to date — by “ring-fencing historic debt... in a move which would allow hospitality companies to continue negotiations with their landlords rather than immediately diverting large sums of cash to pay off bills,” according to the Telegraph.

“It’s very difficult to lift the moratorium without doing anything else,” Adam Walford, a commercial property specialist who represents a number of restaurant operators and landlords in central London at the law firm Howard Kennedy told Eater London. “There’s now a lot of chat about what should be done; a lot more people saying we should share the problem, the burden. There’s less talking about ‘if you can pay, you should pay’ [as had previously been the case].”

The Telegraph reports that both the Prime Minster and Chancellor Rishi Sunak in the Treasury have been involved in meetings to discuss “what support could be offered to pubs and restaurants,” now that restrictions will not be lifted until at least 19 July.

Hospitality businesses have been able to serve guests indoors since 17 May, but the rule of six has remained in place and only table service has been permitted. Social distancing restrictions have not been lifted to protect both staff and guests, but that has meant many venues have had to limit capacity. Pubs have arguably been affected more than restaurants as they have not been permitted to serve customers at the bar.

Walford said as well as the fact that restrictions would now not be lifted next week as planned, the marked change in how tenants and landlords were discussing their respective predicament signalled that “the government may well do something.”

“When you take that [change in discourse] and the delay to the final lifting of restrictions, then I don’t think they can just roll the moratorium on. Each time it’s extended, the problem gets bigger,” he said. “There does need to be much more structure and framework [for both parties to work with].”

A decision on what the government does, now it has confirmed that restrictions will not be lifted on 21 June, is expected to come later this week.

• Ministers weigh up hospitality rescue over billions in unpaid rent [Telegraph/Paywall]