BRC advises retailers to pitch for monthly rental payments
The British Retail Consortium (BRC) is arming retailers with the means to tackle landlords over rent-payment terms.
With the next quarterly payment day just a week away (25 December), the BRC has produced a template letter to enable tenants to approach landlords about switching from paying rents quarterly in advance, to monthly in advance. The BRC has also worked with legal advisors to produce a draft deed that provides for a legally binding agreement to changes in payment terms.
This is the latest stage in the BRC's three-year campaign to persuade landlords to end the ancient and unjustifiable practice of requiring rents be paid quarterly in advance. This adds extra costs and creates real cash flow difficulties for retailers, particularly in the current tough trading conditions.
The BRC believes its campaign has lead to monthly terms becoming the norm on new leases. But the retailers' organisation is calling on landlords to respond to the economic slowdown by offering flexibility, even on existing leases, where that is what businesses want.
The template letter and deed will help smaller retailers in particular. They may not have the expertise or resources to do this for themselves.
Part of the BRC's template letter to landlords says: “Over the past year we have seen several very well-known retailers, and many smaller businesses, disappear from the high street due to adverse trading conditions resulting from serious cost inflation (labour, rent, rates and utilities) eroding margins and of course the impact of severe contractions in the credit markets.
“One very helpful change which, you could initiate would be to move our payment terms in our existing leases from quarterly in advance to monthly payments in advance. I believe this move is in line with modern business practices, having been accepted as best practice on the majority of new leases and would make cash flow management significantly easier.”
British Retail Consortium Director General Stephen Robertson said: “The BRC has made significant progress in establishing monthly rents as the norm but today's tough trading conditions mean the impact of paying three months in advance is that much greater.
“Seeing retailers driven to the wall is in no-one's interest. By agreeing to a fairer rents regime, landlords will be contributing to the retail prosperity on which they themselves depend.
”With these draft letters, we are offering the BRC's help to all retailers, but especially those who are unlikely to have the expertise or time to tackle landlords over making this change.”
The practice of paying rent quarterly dates back to the Middle Ages. At a time when the horse was the best form of transport available, collecting rent more often than four times a year was impractical. So the lords of the land sent out their agents every three months and, to help tenants remember the days, they were associated with quarter days in the Church calendar. The next is 25 December 2008.
British Retail Consortium