Subway is failing to pay its rent, despite continuing to take payments from franchisees, landlords have claimed.

Bloomberg reports that group of landlords allege Subway is exploiting the moratorium on evictions by holding on to rent from franchisees.

Adam Coffer, chairman of the Property Owners Forum, which represents more than 100 independent landlords, said: “Subway is fully aware that no action can be taken against them because of the moratorium on commercial tenant evictions, even though the moratorium is intended to protect those tenants who really do need help and can’t pay their rent.”

A Subway spokeswoman told Bloomberg that “some landlords” had been paid. She said that at least half of Subway’s UK landlords would receive rents by next month, and that the rest had not submitted the “correct paperwork.”

In a letter sent to landlords in June seen by Bloomberg, Subway outlined changes to long-standing arrangements for rental payments that were previously handled directly by UK franchisees.

Under the new system, Subway Realty, which holds leases on the company’s stores on behalf of franchisees, now collects payments from individual operators and passes them on to landlords.

CFO Ben Wells told franchisees: “This will benefit you, in that it will streamline the process and reduce delays.”

The letter also proposed an agreement with landlords that they not seek rent for the three months to 23 June and agree to monthly payments thereafter.

However, some landlords say they have received no rent since March, even though they know their franchisee tenant paid it to the parent company.

Subway responded that it is working on securing rent reductions from landlords, which it would pass on to its sub-tenant franchisees “who represent exactly the type of business owners intended to be protected at this time.”

Coffer criticised the government’s decision to extend the eviction ban, arguing that the vast majority of struggling tenants have been offered deals including waivers or repayment plans to cover unpaid rent during lockdown.

“Landlords are not all cigar chomping, pinstripe suit-wearing barons,” he said. 

“We find the moratorium has been consistently abused by large, multiple-site tenants who ignore rent and see property as a credit card to abuse for their own cash flow needs.”

Many of those tenants have businesses that have continued to operate during the pandemic, and are therefore well-funded and able to meet their rent obligations, he added.

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