Landlords not delivering on rent reform

21 December 2009

Despite the recession, only a small minority of landlords are allowing retailers to switch to paying rents monthly rather than insisting on the archaic practice of quarterly payment upfront.

Just days before the next 'quarter day' in England and Wales, 25 December - on which the quarterly rental payments are due - the British Retail Consortium (BRC) is publishing a snapshot survey on retailers, asking about their rental arrangements.

It reveals, just 12 per cent of retail property leases are now on monthly rental terms. And nearly 90 per cent of respondents who had been allowed to move to monthly terms said they had been or would be penalised with higher charges. Two-fifths said if they had been allowed to move to monthly rents it was just on a temporary basis – typically a year.

As a result of the BRC's campaigning over the last three years, monthly rents are much more common on new leases. The BRC's Monthly Rents Survey found that since January 2008 two-thirds of new leases have included monthly payment terms. But, despite moves by some, commercial landlords have a long way to go on showing this degree of flexibility on existing leases.

The BRC's campaign predates the recession. The retailers' organisation has always said quarterly rental terms are wrong in principle. It is an unjustifiable practice from an era when horseback was the fastest means of communication and has no place in the modern age. But this year the impact of the recession has given the campaign a new urgency as the extra costs and cash flow effects of paying rents three months upfront have become more significant.

Stephen Robertson, British Retail Consortium Director General, said: "It's been a tough year with many thousands of shops falling vacant. Helping out before that happens is in the interests of both landlords and retailers.

"Thanks to the BRC's campaigning, good progress has been made in establishing monthly rental terms as the norm on new leases. But landlords are frequently failing to offer the same flexibility on existing leases. Even when they do, some are slapping on extra charges.

"Demanding to be paid three months in advance belongs to a bygone era when horseback was the quickest form of communication. It has no place in our modern world of email and online banking. One in eight leases on monthly terms is shameful. Landlords should offer monthly rental terms on all leases where retailers ask for it.”

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