Hospitality rent moratorium must be amended or ‘thousands could go bankrupt’

The government must step in to protect hospitality businesses from landlords taking aggressive action over unpaid rent or thousands could go bankrupt, a restaurateur has warned.

 

Stephano Borjak, director of Caffè Concerto, told The Caterer the lease forfeiture moratorium did not go far enough to stop property firms exploiting loopholes in the system.

 

He said his company was facing legal action and owed around £480,000 on a central London site.

 

The government has banned landlords from evicting tenants by issuing winding-up petitions and statutory demands, but not from seeking county court judgements. This means they may be able to instruct bailiffs to seize assets to cover rent debts.

 

Caffè Concerto is one of several hospitality businesses around Leicester Square and Piccadilly Circus facing a court claim from property owner Criterion Capital, the Mail on Sunday first reported.

 

Borjak said a separate private landlord was also asking the group to pay full rent on a site but had not begun legal action.

 

The café chain, which runs 19 UK sites and seven in the Middle East, was able to reopen for just over two months last summer but struggled without its typical tourist or office worker customers.

 

“How are we supposed to find the money for future and backdated rent? It’s impossible,” said Borjak.

 

“When hospitality is allowed to reopen businesses won’t instantly bounce back. It’s going to take a year to return to normality, but landlords are playing hard ball with us.”

 

Criterion's legal claims were made after the government published a voluntary code of conduct for commercial rent negotiations during the Covid-19 crisis. It encouraged a collaborative approach and said tenants should “pay what they can”, while landlords should “provide support to a tenant where reasonably possible”.

 

Borjak said Caffè Concerto has applied to defer the court order for 28 days but had been advised it may struggle with its legal case as it is technically in breach of the terms of its lease.

 

Most of the group's other landlords have been co-operative and agreed to switch to turnover-based rents, he added.

 

“We have no solid claim to defer to. We can say we’re in a pandemic, but I don’t think a court will accept it. We’re in a really bad situation. We don’t know how long we’ll be shut for; you can’t pay for something that is not used.”

 

Borjak said the government needed to amend the lease forfeiture moratorium, which ends on 31 March, otherwise thousands of businesses could go bankrupt.

 

“The government must step up and offer different tools to tenants otherwise it will be a nightmare.

 

“We pay a total of £7m rent on all our sites, so over a year and a half we would owe around £10m rent. It would take about 10-15 years to pay back, which is impossible.

 

“If we go bankrupt it is going to cost the government. If they liquidate our company, 400-500 staff will have to go to the government for support and they’ll lose VAT and tax payments.”

 

Kate Nicholls, chief executive of UKHospitality, said most landlords were working collaboratively with businesses.

 

She added: “UKHospitality has called for county court judgements to be included in the moratorium; although the government has indicated that it believes there is enough protection in place for tenants already.

 

“We still need the moratorium to be extended further and commercial landlords need to avoid using loopholes to punish businesses and start negotiating... a minority have made life difficult for hospitality businesses that have taken a beating in the past year.”

 

When The Caterer approached the government over whether there were plans to extend or amend the lease forfeiture moratorium, a spokesperson said: “Throughout the pandemic we have provided an unprecedented £280b package of economic support, while supporting businesses and high streets, as well as safeguarding millions of jobs.

 

“This includes passing legislation to protect businesses from eviction and insolvency if they are struggling to pay rent due to Covid-19, and ensuring they won’t be forced out of their premises during challenging times.

 

“We continue to work closely with both commercial landlords and tenants on these issues.”

 

Criterion Capital had not responded to request for comment at the time of publication.

 

Photo: Shutterstock