In a move that will surprise absolutely no retail landlords, Mike Ashley's Frasers Group has announced that it intends to withhold rent "indefinitely" (or rather, until trading has returned to the levels envisaged when its vast portfolio of leases were entered into).
Such a position would, of course, leave major scope for debate in terms of when the Group - which expanded further with the £97m purchase of a 5% stake in Hugo Boss last month - would deem it appropriate to restart rental payments across their retail empire.
The announcement brings into focus the lack of teeth behind the Government's "Code of Practice for commercial property relationships" - a voluntary set of non-binding principles designed to encourage a collaborative approach between landlords and tenants to navigate the economic uncertainty caused by Covid-19.
The Code of Practice, together with the moratorium on forfeiture for non-payment of rents and suspension of other landlord protections, were intended by the Government "to be exceptional, time-limited measures to deal with unprecedented times of acute market shock".
Frasers' announcement last week implies an 'all or nothing' (or, more realistically, 'some or nothing') approach, which fails to account for the grey area between brands being unable to trade out of retail shops at all and a fully recovered, thriving retail market (it is debatable when this last was a reality).
The retail market is in the middle of this grey area now that stores have been permitted to open for trade. LandSec have reported that as of 30 June, 79% of their retail units in England are trading and in the two-week period since non-essential retail opened on 15 June, footfall was at 60% of levels for the equivalent period in 2019 and like-for-like store sales were at 80% of 2019's equivalent figures.
There is a perception that the real estate market generally has responded well to the challenge laid down by the coronavirus outbreak, with huge numbers of concessions having been agreed by institutional landlords to support their tenants in their time of need and this has been facilitated by much closer communication and collaboration between landlords and tenants.
The continuation of this sort of constructive engagement and crucially, the willingness to make reasonable concessions, will be pivotal in ensuring the success of both landlord and tenants' businesses going forward.
Frasers Group has told landlords that it intends not to pay rents until trading “reaches a level” that parties would have “envisaged” when its lease agreements were drawn up.