Are landlords the key to whether businesses survive?

25 Jun
Recovery - Is it time to negotiate with your landlord

Are landlords the key to whether businesses survive?

With the Government allowing the relaxation of social restrictions and reopening of many businesses, the time has come for you business owners to count the losses and work out how you can rebuild your business.

It is expected that nearly all businesses negatively impacted by the lockdown period will have made a trading loss, but who will pay for those losses?  In reality, the main parties who would ultimately be responsible are:

  1. The business owner – as future profits are first utilised repaying the losses
  2. The creditors – through an agreed write down of debt or a form of insolvency procedure
  3. The landlord – through negotiation of reduced terms or rent free periods

If business owners want to avoid taking the entire hit of losses and they also want to avoid an insolvency procedure then the negotiations with the landlord are going to be key.

Have you managed to start discussions?

With the June quarter rent now payable, have you managed to get into sensible discussions with your landlord or are they stonewalling you?  Recent enquiries to our office have indicated that some people are not aware of the terms of their lease, whether there is a break clause, who is actually responsible for the rent payments and whether the lease has been personally guaranteed. Without this knowledge your position is severely hampered if you need to enter negotiations with your landlord. 

If you’re talking, is your landlord now your biggest creditor?

Assuming you have been successful in negotiating at least a deferment of rent, the landlord is likely to be one of the largest creditors.  Is now the time to speak to them about rent free periods or longer deferment periods?  

If a rent deferral continues to accrue, will you be able to pay this back when the agreed time comes?  For example, are you going to make enough money in the next three months to afford the full outstanding amount of rent?

What if your landlord is stonewalling you?

If the landlord is not willing to have sensible discussions, then maybe you should be considering other options, including the possible restructuring and rescue solutions that a formal procedure can bring.

Perhaps the alternative of formal procedures will focus them at the negotiating table with a more open mind?

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