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More UK retailers could collapse ahead of rent quarter due

* Manches-Siobhan-Jones.jpgRetailers woes likely to mean more firms going under this week rather than pay their next quarter's rent, a property specialist warns.

Siobhan Jones, a commercial property specialist at law firm Manches, said there was a limit to how much flexibility landlords had in reducing rents because of their own pressures.

"They will also be subject to the squeeze and will be needing to satisfy their own lenders' conditions. Landlords may be willing to accept less rent, or monthly rent, in the short term. However their ability to do so will not be without limit. They will be looking where possible to turn to past tenants and guarantors who may be on the hook for the current tenant's liabilities under the lease."

"Retailers have found the past few months to be extremely difficult. They have suffered poor summer sales, due to the squeeze on consumers which has limited spending in light of high inflation and an increased cost of living.

"Retailers' woes will be exacerbated by the need to buy their Christmas stock, in the knowledge that many consumers will delay their purchases until after Christmas and the start of the sales.

"They will also be burdened by other liabilities connected with their premises, such as business rates. The British Council of Shopping Centres recently called for a review of business rates to allow more retail businesses to be given a fighting chance of survival.

"As a result of this we might well see a number of high street names become casualties of the economic climate when rents fall due. There is only so much landlords can do to assist their retailer tenants, for example by agreeing monthly or reduced rents, and there will be other creditors, such as lenders, keeping a firm eye on retailers' finances. In short this could all add up to an explosive September quarter.

"Retailers and their creditors will also be aware of the uncertainty surrounding pre-pack legislation and the Government's proposals to amend the legislation to require more notice to be given to creditors of an intention of a struggling company to enter a pre-pack administration. This may sway companies on the brink to re-structure using this method before the risk of a change in legislation materialises next year.

"Retailers, creditors and insolvency practitioners alike will also be keeping an eye on the legal action launched by the landlords of TJ Hughes to challenge the ruling in Goldacre v Nortel Networks which would allow them more scope to recoup rent from administrators, even if they are appointed after quarter days or other rent payment dates.

T: 020 7404 4433
E: [email protected]
W: www.manches.com

30th September 2011

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