OPINION
RENT MORATORIUM AND BUSINESS RATES REVIEW One ‘good’ thing happened during Covid. Landlords and tenants now better understand that the rent/rates model was broken. Most landlords have become much more sensible about the viability of their tenants, and they understand that if they don’t have tenants, there is no rent and within three months they will liable for the rates. The end of the rent moratorium means that landlords and tenants now must agree on a way forward. If they don’t agree, the tenant will lose the site. There is now a legally binding arbitration process that you can go through. The arbitration process will only be applicable to those operators who were forced to close (for example, the grocers and convenience stores didn’t have to pay their rents but didn’t have to close, so it is going to be very interesting to see what happens there). One sensible solution is to come to an agreement with the landlord where 50% of the rent owed is paid over the remaining term of the lease - assuming, of course, that the business can afford that. If cash is really tight and your business has not rebounded, it’s going to be a very difficult negotiation with the landlord. If your cash position is strong enough to pay off this debt that’s great. If not, it is very easy for someone to say go out and get a loan. Not so easy to do. The banks have got to give you a loan. Assuming you get the loan, can you afford to repay it, especially with rising interest rates? With all the current increase in on-going costs, you have to really work out your cash and ask, 28
At a pivotal time for many in the sector, Maurice Abboudi - experienced board member, operator, investor and advisor to the hospitality and leisure sector, recipient of PAPA’s Lifetime Achievement Award 2020 for contributions to the sector and judge on BBC2’s series two of Million Pound Menu – shares his views on rates, rents and the deluge of other factors now combining to impact hospitality businesses. “will this work?” Is your business model viable, or are you just going to be working to pay off debt, the rent and all the increased costs? After all, you are in business to make a profit. Tough decisions lie ahead. Business rates are another significant issue within our sector. Businesses have been paying one third of their rates last year. This will rise to 50% in 2022/23. From April 2023, the full
payment of rates will return. There is to be a reassessment of how the rates are calculated in April 2023 – something which is usually carried out every five years or so, the last time being 2015. Every single property will have to be reassessed. The government has to look at what the rateable value is for each premises based on a variety of things such as transport links, the current rent value and the property value itself. www.pizzapastamagazine.co.uk
