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28 November 2021

Opinion from Adrian Leopard & Co

News impacting business from Adrian Leopard & Company - Insolvency Practioners & Mediators

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Hospitality rents crisis – what is the way out?
Adrian Leopard 228

Hospitality rents crisis – what is the way out?

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Crunch time is approaching. Hospitality businesses need to be sure about the future before they get embroiled in further difficulty and pressures

Who would be in the hospitality industry today with all the pressures and problems?

The trouble is that, like it or not, hospitality brings people close together and hence the problems which have arisen with the pandemic. Of course hospitality is all about socialising, close friendships and the like. Naturally people will be in close contact – that is the simple way of the world.

The question of having a business the operation of which is suspended for an almost indefinite basis would normally mean total insolvency within a relatively short period but because of the pandemic things have been different. We have had a furlough scheme; grants, tax deferrals and the rent moratorium, amongst other reliefs. The trouble is that apart from the grants which have been payable, the accumulating debts continue to accumulate.

The Welsh government has now decided to extend the rent moratorium until the end of June. The English government was said to be talking about some form of relief but this has not yet been announced. As things stand, landlords will be able to tank in at the end of March.

The amount of accumulated rents within the country now must be absolutely huge and it is difficult to know what fair solution could be found. Clearly business owners have had no revenue to meet rents and have been forced to shut by government edict. Landlords, on the other side of the coin, have done nothing but sit back and refrain from taking action – because the courts were instructed not to allow it, all again because of government edicts.

Once the moratorium has come to an end, landlords will be able to get their tenants out and pursue them for outstanding rents. Will businesses be able to make enough money to pay the rents off within a reasonable period?

Many businesses have negotiated with landlords to see if they will take reductions in the amounts owing to them and change the basis of their tenancies to a turnover basis – in other words no revenue no rent. Conditions like that would of course enhance a landlord’s risk – would he want to have hospitality tenants who could be shut down at a moment’s notice. What is worse is that this pandemic is not over yet and there is already talk of a further spike at the end of the summer resulting perhaps in another lockdown. And when this pandemic is over, who is to say there is not going to be another one with something else in due course?

Business has never been in such uncertainty.

If you are a business owner in this position, you would be well advised to seek advice as to the best way forward because it may just be the case that trying to soldier on is never going to work.

We would strongly recommend that you talk to your landlord and see what arrangements can be reached, if necessary possibly engaging in mediation to see if there is a way forward.

But if the debt is going to stand and is such that it will make your business unviable, you may have to consider a form of insolvency. That of course is much more straightforward if you are operating through a limited company – less so if you are trading as an individual. There are various options which could be considered and you should seek solid professional advice to help you determine the right way forward for you.

Hospitality businesses will be re-opening in a matter of weeks. The great temptation is to start up again and “hope for the best”. Unfortunately there are too many hurdles at the moment, not least how long it will take for public confidence to build back up and bring the revenue you will need to make your business viable. You may find that arrangements put in place now could enable you to build your business back up without the burden of debt which could make it impossible.

Act now and make informed decisions.

Adrian Leopard 10-03-21

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