Leading association says industry needs help from government to persuade lenders to be more flexible on debt arrangements, otherwise repossessions and job losses will follow.
The Government’s SME package doesn’t go far enough to help safeguard the capital’s commercial landlords, says a leading property group.
The London Property Alliance, which represents 420 of Central London’s commercial property owners, investors and developers, has welcomed Chancellor Rishi Sunak’s announcement that companies with a turnover of between £45m and £500m will now be able to access a loan of up to £25m through the Coronavirus Large Business Interruption Scheme.
But it says that while property owners provide tenants with as much flexibility as possible to try and prevent closures and protect jobs, they’re still severely constrained by their own debt covenants and loan obligations.
The group recently wrote to the Chancellor warning that their financial stability will be at risk if banks and lenders don’t start to show flexibility towards landlords who’ve stopped receiving rent.
It believes lenders could seize properties if unpaid rents and falling values lead landlords to breach debt covenants. It adds that many landlords are among the 30% of SMEs which have debt that is not accredited by the British Business Bank, so will not benefit from the scheme.
Executive director Charles Begley tells LandlordZONE that flexibility from lenders is vital so that landlords can support tenants with rent deferrals and holidays, helping safeguard against permanent business closures.
“Unless the Government can exert pressure on lenders – and work with other governments and financial regulators around the world to do likewise – the ability of the property sector to support their tenants will be seriously restrained.”
He adds: “We are not calling for specific legislation to tackle this issue, just unequivocal political support and a concerted effortto ensure the finance industry, which encompasses the full range of funders and lenders beyond the big banks, is explicitly advised to grant property owners the flexibility they require.”