Retailers call for “pandemic clauses” to cut rent payments

Published on: 27th October 2020

The “pandemic clauses” mean rent payments will be reduced if a non-essential store is forced to close due to a lockdown.

“pandemic clauses”

Retailers taking new leases are reportedly seeking “pandemic clauses” to ensure rent payments will be reduced if the store is forced to close as a result of a local lockdown.

An increased number of retailers are seeking such clauses following the government’s newly imposed tier system in England, and other local restrictions across Scotland and Wales which are impacting the high street dramatically.

Last week, shops selling non-essential goods closed in Wales for a duration of 17 days as the country went into a national ‘firebreak’ lockdown.

Meanwhile in Scotland, non-essential retail remains at risk of temporary closure if a proposal by First Minister, Nicola Sturgeon, featuring localised top-tier restrictions is approved. If implemented, those areas placed in Tier Five will face a near lockdown situation, the difference being that schools can remain open.

The Sunday Times has reported that companies such as Schuh, the VF corporation – which owns The North Face and Timberland – and Sports Direct are among the most recent retailers using the process.

The clauses are structured so that the rent is halved when an enforced closure takes place in the case of a local lockdown. In some cases, if a lease is based on turnover, the base rent will fall by half.

Shopping centre owners Hammerson and British Land have reportedly already agreed leases on these terms, as retail tenants and landlords continue negotiations over easement measures such as rent holidays or deferrals, which many tenants need to avoid going bust due to the ongoing effects of the pandemic. Landlords are struggling to keep tenants and have been forced to offer more favourable terms. Quarterly rent collections continue to be incomplete, with many landlords claiming that less than 50% of rent has been collected from their tenants of retail premises.



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