Pret A Manger, Hugo Boss and the UK’s largest independent toy retailer have been threatened with legal action by shopping centre landlord Westfield over unpaid rent as England enters a second lockdown.
“It’s unprecedented, it’s not a reasonable action for a landlord to take at a time of year like this, especially on day one of the lockdown,” said Gary Grant, executive chairman of The Entertainer, a toy chain which has 173 stores.
Mr Grant received a letter from Westfield on Thursday demanding that the company pay its bill in full or face legal action to collect outstanding rent.
The letter, seen by the Financial Times, threatened enforcement action if payment was not received within a week. Mr Grant said the threat was withdrawn after he contacted his local MP about the dispute.
Sandwich chain Pret, which has announced more than 3,000 job cuts since the start of the pandemic as it seeks to cut costs, and fashion retailer Hugo Boss have also been told to pay their rent arrears or face enforcement action from Westfield, according to people with knowledge of the matter.
Pret and Hugo Boss could not be reached for comment.
The episode highlights the tension that has built up between tenants and landlords during the pandemic and threatens to escalate ahead of the all-important Christmas shopping period.
Mr Grant makes 50 per cent of its annual revenue in the 12 weeks leading up to Christmas Eve, with half of that coming in a final four-week blitz.
Melanie Leech, chief executive of the British Property Federation, which represents property owners said “the timing [of the lockdown] could not be worse . . . many businesses typically depend on profits made at this time of the year to support them through much of the rest of the year”.
Rent arrears which have built up since March have become “an insurmountable challenge” for many businesses, added Ms Leech.
Figures from trade body UKHospitality show that by the end of the year the sector will owe nearly £3bn in unpaid rent, and commercial landlords are losing out on £1.5bn every three months in lost rent, according to analysis by Remit Consulting.
Westfield is part of the Unibail-Rodamco-Westfield group, which has a €60bn property portfolio including the centres where Mr Grant is a tenant and is looking to raise €3.5bn from investors and sell off malls worth €4bn to ease its debt burden.
Scott Parsons, regional managing director of URW, said: “Our firm strategy is to work in partnership with our retailers. Only in situations where a retailer has refused to collaborate in pursuit of an agreement that could work for both parties would we consider legal action.”
Tenants and landlords have urged co-operation, but some have reported resistance. Mark Derry, executive chairman of Brasserie Blanc, which owns pubs and restaurants around London and the south-east, said the company had agreed revised deals with two-thirds of its landlords under which it will pay about 7 per cent of turnover as rent. The remaining landlords had been “unwilling to engage”, he said.
“I think they think the problem is so hopeless that it’s not worth negotiating,” he said.
But James Daunt, chief executive of Waterstones, said that it was up to the government to establish formal mechanisms for dealing with arrears rather than relying on a voluntary code of conduct and a moratorium on evictions.
Retail, hospitality and property trade bodies are calling for the government to introduce a “property bounceback grant”, which would cover up to 50 per cent of rent and would sit alongside the jobs furlough scheme.
“The landlord/tenant issue has just been kicked down the road,” said Mr Daunt. “If you look at France, Italy, the Netherlands or Germany, they have all got schemes in place or guidance on how the consequences [of arrears] should fall between the parties.”