ukactive has issued an urgent call for the Government to restrict tactics being adopted by landlords who are coercing gyms and leisure centres into paying rent that has been withheld as a result of COVID-19.
Section 82 of the Government’s new Coronavirus Act 2020 came into force on 25 March to help protect commercial tenants, banning the forfeiture of commercial leases until 30 June 2020 (or longer if the government deems necessary) for non-payment of rent.
However, the Act does not prevent landlords from issuing Commercial Rent Arrears Recovery (CRAR), a debt claim, service of a statutory demand, and commencing winding-up proceedings – each of which is lethal to businesses with no income.
While some landlords have engaged constructively with tenants to find solutions that work for both parties, evidence gathered by ukactive shows a growing number of cases where the reaction of landlords has been to instigate legal proceedings against operators immediately.
ukactive has urged the Government to:
- Amend the Coronavirus Act 2020 to stipulate that landlords cannot pursue legal action against tenants, such as issuing statutory demand notices and winding up orders.
- Reduce the pressure on landlords by introducing financial support for a rent holiday, preventing them from resorting to legal action.
Gyms and leisure centres are part of the wider leisure industry which is falling victim to the situation after being forced to close by the Government on 20 March – with pubs, restaurants, cafes, cinemas, and retailers facing similar threats.
Huw Edwards, CEO of ukactive, said: “We recognise that landlords are under enormous pressure at this time, however, taking legal action such as issuing statutory demands and winding up orders against gyms and leisure centres, is entirely disproportionate to the financial implications they themselves face.
“Many of our members are faced with the harsh reality of no revenues for a long period, so must take steps to preserve cash, including not paying their rent for the quarter ahead.
“We know from our discussions with operators that some landlords have engaged in constructive discussions to reduce the pressure on tenants, however, a worrying number have decided to pursue statutory demand notices or winding up orders.
“We need the Government to act now to direct within the Act that landlords cannot do this. With 2,800 gyms at risk of permanent closure, and 100,000 jobs at stake, time is of the essence.
“We urge the Government to take urgent steps to close the loophole and defend these businesses, safeguarding the jobs and valuable services provided by gyms and leisure operators.
“ukactive remains committed to working with the Government and our partner sectors to support and mediate at this exceptionally challenging time.”
David Lloyd Leisure is just one of the operators that has received threats from landlords at some of its facilities.
The operator appealed to one landlord to request a waiver of rental payments due on 25 March 2020 and going forward for the immediate future, until the crisis eases and the Government allows its clubs to re-open.
The request was refused immediately by the landlord, and was instead met with the threat of legal action through the issuing of a statutory notice.
Glenn Earlam, CEO of David Lloyd Leisure, said: “This situation was, until very recently, wholly unforeseen, and is unfortunately entirely outside of our control.
“In these exceptional times, we want to work together with landlords to ensure we can survive this pandemic and emerge with businesses able to continue to pay rent and other costs in the future.”
There is no requirement to serve a statutory demand as a precursor to commencing winding-up proceedings, but many landlords do this as the non-payment of the statutory demand is itself evidence of an inability to pay debts.
PureGym has also seen similar instances across its facilities. Humphrey Cobbold, CEO of PureGym, said: “We are entering a critical few days as the burden of dealing with economic impact of the COVID-19 pandemic continues to fall on commercial tenants rather than being shared equitably by landlords as well.
“Time is of the absolute essence, given that proceedings such as statutory demands and winding up orders threaten to force companies into insolvency within days of being issued.
“The Government has the opportunity to complete the job it correctly started by doing more to protect commercial tenants impacted by COVID-19.
“It should act to close down the unreasonable and aggressive tactics being used by landlords as a matter of urgency.
“The Government’s action and support will be crucial, especially for the thousands of smaller operators that are threatened by these aggressive tactics and lack the access to advice and resources to fight back.”