BLOOMBERG, page 1
By Deirdre Hipwell & Jack Sidders
Sandwich chain accused of exploiting Britain’s eviction ban; Company has altered rent payment process since virus
The army of franchisees that operate Subway’s 1,600 U.K. stores are paying their shop rents; the sandwich chain just isn’t passing the money on, according to a group of its landlords.
Subway Realty Ltd. is exploiting the U.K.’s ban on evictions by holding the rent from franchisees during the coronavirus crisis in the knowledge it can’t be pursued, the landlords say. The U.K. government extended the measure last week to help small businesses that can’t afford rent, while urging those that can to pay up.
“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,” said Adam Coffer, chairman of the Property Owners Forum, a group set up during the pandemic that represents more than 100 independent landlords, including some who say they are owed rent by Subway.
Ruth Barker, a Subway spokeswoman, acknowledged in an email that only “some landlords” had been paid, though she declined to specify for what time period or respond directly to the allegations regarding the eviction ban. She said that at least half of Subway’s U.K. landlords would receive rents by next month, and that the rest haven’t submitted the “correct paperwork.”
The dispute reflects how the pandemic has further strained relations between U.K. store landlords and their tenants. Property owners have been quick to condemn large multinational businesses that have failed to pay rent. Retailers and restaurant operators, meanwhile, contend that the system of long leases with regular rent increases is no longer sustainable for businesses that are facing reduced footfall after already being hit hard by the growth of e-commerce.
In a letter sent to landlords in June that was seen by Bloomberg News, Subway outlined changes to long-standing arrangements for rental payments that were previously handled directly by U.K. 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.
“This will benefit you, in that it will streamline the process and reduce delays,” Subway Chief Financial Officer Ben Wells said in the letter. It 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 also said via email 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.”
U.K. Extends Eviction Ban for Commercial Tenants to End of 2020
Landlords have slammed 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,” Coffer 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 said.
Shops say they endured months of store closures during lockdown and now face higher operating costs to implement safety measures since reopening. They want landlords to share some of that burden and adopt a more flexible approach to rents.