McComb Property has opened legal proceedings against Holland & Barrett after the retailer proposed new payment terms.
The landlord said it had taken the action after being told earlier this month that it would now receive rent on a monthly, rather than quarterly, basis.
According to McComb Property, the proposed terms would be in breach of the lease on the Holland & Barrett store in Formby, Merseyside.
“I am surprised that a company of this size and stature would attempt to do something so amateurish. After our accounts department contacted them we were told: ‘That’s the way it is from now on, if it doesn’t suit you, take legal action’,” said Michael McComb, chairman of McComb Property.
“I myself then telephoned them to discuss this, I left a voicemail for them to call me back, they didn’t even have the courtesy to return my call, so we issued a summons.”
McComb Property is based near Liverpool. It operates in multiple property sectors, including offices, retail, residential and student accommodation.
A Holland & Barrett spokesman said: “All new leases are being negotiated on the basis of monthly rent and our intent is to negotiate with all of our existing landlords a change from the current terms of quarterly rent in advance to monthly payment in advance. Our average term to break is just under four years but we believe that change is required now.
“We have taken this step to provide us with the important flexibility we need in today’s market, including financial flexibility to continue to invest digitally in our estate. While this is aligned to the strategy being followed by many of today’s high street retailers, we believe this is a significantly less aggressive way to modernise our portfolio.”
Commenting on the wider implications, Herbert Smith Freehills real estate disputes lawyer Frances Edwards said: “Faced with a tenant who demands monthly rents, landlords are right to be exasperated, but may have few options. Forfeiture is likely to be unattractive in the current market. In fact, tenants will know this well as they may be pleased to have had a rental liability removed if a lease is forfeited. So issuing a claim is the only other real option.
“Whilst quarterly rents may create cashflow difficulties for tenants, monthly rents may create the same difficulties for landlords: many landlords will have their own financial commitments which make a change in frequency or amount of payments potentially very difficult to accept. Landlords may have a right to claim interest on late instalments of a quarterly rent paid monthly, but this may not be much of a consolation.”
Hogan Lovells real estate lawyer Katie Dunn added: “It is fairly common for tenants to seek a monthly rent to assist with their cash flow but usually the tenant would seek to agree that amicably with their landlord in advance. Not least because, if they don’t, the landlord remains entitled to pursue a full quarter rent. It is quite unusual for a tenant to simply decide to pay a monthly rent unilaterally, contrary to the requirements of their lease and without at least seeking to agree something with the landlord.”
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