Finding a solution on rent that suits both landlords and tenants is set to be the ‘next big battle’ for the industry, MCA’s The Conversation has heard.

Speaking at the event, J.W Lees managing director William Lees-Jones said that whilst operators’ inability to meet their rental debt has been one of the most prominent ongoing issues of the crisis, the upcoming September quarter day makes it all the more pressing.

“The next big battle, and indeed the biggest battle since the beginning of all this, is rent,” he said. “There is still no solution to it, and if there isn’t a solution by the end of September, it’s going to be a really, really big problem.”

Operating a beer tied rental model, J.W Lees stopped charging its tenants rent “on day one” of closure, an agreement that will remain in place for as long as each site remains closed.

And for Lees-Jones, the shared pain of the tied model – “if there’s no beer sales then nobody’s benefiting” – creates a sense of equality between landlords and tenants in the pub sector that can’t be replicated throughout the industry.

“From our perspective, and a number of other brewery companies with tied tenants, we’ve recognised that we don’t want voids, we don’t want properties to lapse, and so we’ve got to do everything that we can to support those businesses,” he said.

“But if you’re in a shopping centre or in central London, and you’ve got an institutional landlord, then they’re going to hide behind pensioners and say that they can’t possibly do anything, because that means pensioners won’t get paid.

“I think that property freeholders are very good at hiding behind things, and that’s not good.”

Given this, in his view, innately volatile relationship between landlord and tenant “based on strife,” Lees-Jones argued that continued Government protection for tenants will be essential as the industry approaches 29 September.

“That will be a horrible day if the Government stop protecting tenants,” he said, adding that “how landlords behave if their tenants are no longer protected will show their true colours.”

One proposed method of protection, put to Government in a joint call by landlord and operator trade bodies earlier this week, is the Property Bounceback Grant.

The idea, formulated by The British Property Federation (BPF), British Retail Consortium (BRC), Revo, Uk Active and UK Hospitality, would see Government issue grants of up to 50% off rent and service charges between March and September, conditional on an agreement by the landlord and tenant to account for the remaining 50%.

Although Government are yet to agree to the proposal, research commissioned by the trade bodies found that it would be financially beneficial, for all parties, if they were to do so.

Should they support half of unpaid rent across the retail, hospitality and leisure sectors for six months – costing £1.75bn – the total return to the Treasury in terms of tax revenue from economic activity would be almost £7bn, and 375,000 jobs would be saved.

Given its shared pain and shared reward nature, the proposal “could well be” the solution to the rent issue, AlixPartners MD Graham Smith told the virtual event.

Speaking alongside Lees-Jones, Smith said that what’s most important about the scheme is its recognition of the pain felt by landlords and tenants alike during the crisis.

Faced with the reality that very few businesses can service fixed obligations, such as rent, on zero revenue, Smith noted that it is “very easy” for people to see the rent debate from the tenants perspective, “but you’ve got to look at the other side as well.”

“Some landlords have their own financing structures behind them where their only income is the rental that they gain from their tenants,” he explained. “So, I think what is important for finding a solution to help the country deal with this almost unthinkable disruption, is that it needs to take account of the fact that yes, there are pressures on the tenants, but also on the landlords as well.

“You’ve got to deal with both in order to find a sustainable solution.”

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