Channel Island retail landlords must brace themselves for bad news and act quickly, says property expert

Wednesday, December 28, 2011

Landlords on the Channel Islands' high streets need to be braced for bad news and be prepared to act quickly, warns Collas Crill property expert Michael Morris.

"The prediction is that the last quarterly rent day of the year - 25th December - will have been a gloomy day for landlords," said Mr Morris, UKproperty specialist at the Channel Islands law firm.

"Lingerie firm La Senza did not even survive until the sales and went into administration on 23rd December. Blacks Leisure, owner of Millets, which has stores in both Jersey and Guernsey, struggles on but is widely tipped to go into administration in the new year if it cannot find a buyer. Its latest announcement revealed that the deals it was working on would leave the company almost worthless to its shareholders.

"While shoppers have flocked to the post-Christmas sales, with scenes on high streets resembling those pre-crunch, it remains to be seen if the sales takings will be sufficient to carry retailers through to the next rent day. HMV for example announced that Christmas weak sales may cast "significant doubt" on its future.

"For landlords, it may mean that Christmas celebrations will be muted this year. They will need to be braced for bad news and be prepared to act quickly."

"Not only will landlords have to be aware of failing tenants, but they are likely to hear that tenants do not wish to renew their leases. In addition to HMV, Mothercare, Clinton Cards and Thorntons have all announced their intention to reduce the number of stores that they trade from. Even retail magnate Sir Philip Green's retail behemoth, Arcadiais affected. He has announced his intention to reduce the number of stores that Arcadiabrands (which includes BHS, Topshop, Burton, Evans and Miss Selfridge) trade from by 10%. When you hear this roll call of retailers it is hard to imagine that theChannel Islands will be entirely immune.

Mr Morris has the following advice: "More than ever before landlords need to focus on how their tenants are performing, maintain tight credit control procedures throughout the lease term and respond quickly when a tenant experiences financial difficulties.

"If a tenant looks like they may be in difficulties and should look very carefully at their lease documentation. There may be another party who is liable in the event of a tenant default (which may include former tenants or guarantors) or the tenant may also have an opportunity to end their lease early

"The best situation for the landlord is that their tenant does not collapse into administration at all. This may mean negotiating with tenants as early as possible to help them with cash flow."

If the worst happens and the tenant 'goes bust', Mr Morris says: "The language of insolvency can be confusing and it is imperative to analyse whether the tenant is subject to administration, compulsory liquidation, voluntary liquidation, receivership, voluntary arrangement or some other procedure. Each has different implications for the landlord and it is important to take legal advice as soon as possible."

The previous quarterly rent day on 29^th September spelt disaster for some landlords of retail property in England and Wales, while the first two at the end of March and June this year saw the collapse of a number of high profile names including Focus DIY and Habitat.

Figures from the Office of National Statistics have consistently shown a contraction in retail sales in England and Wales this year. Mr Morris said: "With no official statistics for the Channel Islands, it is difficult to assess how local retailers are coping, but the high street in both islands cannot avoid the impact of one of the national retailers failing, as high street giant Woolworths did in 2008