Insights 5th June 2020 Property Management

With the June Quarter Day in England looming, the industry is speculating on the ability of landlords to collect the rents that will become due, given that many of their occupiers will have been closed for business during the preceding quarter. So can the Scottish May Quarter Day provide a clue as to what we can expect?

As the timing of rent obligations is different in Scotland (with quarterly rents typically falling due either the 15th or 28th May), we have been reviewing the collection rates as an indicator as to what might happen at the forthcoming June Quarter. These reflect the fact that many payment arrangements have already been agreed which has resulted in the phased payment of the sums due.

Early indications

We are now at seven days after the May 28th due date and the progress is encouraging. Collection rates average 53% for rent and around 51% service charge, demonstrating better results than the 15th May due date. This could be attributed to occupiers being more engaged as lockdown is eased, enabling a greater focus on business operations.

Whilst there is a considerable disparity, this trend has followed across all sectors. In turn, will we see something similar on the 24th of June?

Performance by sector

Rent collection on industrial assets at Day 7 is at 65%, with service charge collection at 52% collected at Day 7. The office’s sector in comparison has been almost the reverse of the industrial sector, at 57% rent and 63% service charge recovered.

Whilst office service charges are higher in comparison, office occupiers may have a greater focus on the need to have common areas fully operational for their staff to return to work.

The Retail and Leisure sector has been one of the hardest-hit during the pandemic and many operators already had agreed on payment arrangements in place to reflect the lockdown. Against this backdrop, achieving 30% of rent and 38% service charge collected at Day 7.

The legal remedy

It is worth remembering that Scotland has a separate legal system and is subject to a separate moratorium on arrears recovery.

Ordinarily, there is a 14-day period for the tenant to satisfy a charge for payment. If no payment is made, this can result in further action to terminate the lease and pursue the debt by other means. Currently, this notice period has been extended to 14 weeks, which has a significant impact on a Landlord’s ability to pursue arrears.

Maintaining occupier engagement is crucial

The results we have seen here so far are a great credit to Workman’s Credit Control and Property Management teams who have worked tirelessly together in advance of the Quarter Days to ensure occupiers remained engaged and aware of the Landlords’ expectations.

We continue to work closely with clients to ensure that the strategy is clear, and we are in a position to resolve any issues as they arise and without delay.

By Jim Hallan, Partner