But from January, landlords could be handed some welcome respite. New retail insolvency regulations are set to come into force next year, designed to stymie quick sales of retailers in administration.
The new guidelines have been designed to crack down on pre-pack administrations, which can be the bane of landlords’ lives. Pre-packs have come under intense scrutiny this year because the retailer put into administration is quickly bought out by its new owners with reduced liabilities, which often include stores.
Several retailers have been placed into pre-pack administration this year and most have been bought out with a reduced store portfolio. The burden of those unwanted stores then either falls on the retailer that previously leased the property or the landlord.
Some retailers are even blasé about putting their chains into pre-pack administration. Take Envy and Faith boss John Kinnaird for example. Before Envy went into pre-pack administration, Kinnaird told Retail Week that if landlords didn’t agree to new, more flexible and probably cheaper rents, he would have to put the chain into pre-pack. And that is exactly what he did.
While nobody would argue retailers are having a tough time, there have been serious questions raised over the pre-pack method. Retailers should be talking to their landlords about their rents in these tough times and landlords should be listening and trying to help where they can. The relationship between retailer and landlord will not progress if it is based on threats.
Take MFI as an example. The furniture retailer has suffered for months in the difficult economic climate and its staff have had to work through two administrations. Last weekend, its stores were shut as the administrator failed to find a buyer.
MFI's situation is grim but it was made worse by the bitter rows between the retailer and its landlords. MFI threatened to abandon stores if it didn’t get what it wanted and many said the way it went about negotiations only served to get landlords’ backs up. And, at the end of the day, those negotiations achieved nothing.
The new guidelines will make it mandatory that administrators disclose detailed information to creditors before and after a pre-pack administration. This could lead to more communication between retailers and landlords. And as we face a tough year in 2009, communication will be essential so all parties survive the rough ride.