By Laurence Hill
Despite taking place over 3,000 years ago, David and Goliath is an ancient story that continues to resonate. The tale of the plucky underdog triumphing against the odds is certainly one that has come to mind in recent weeks when observing the contemporary battles taking place in the UK between hard-up tenants and unpaid landlords in the wake of the coronavirus crisis. This perception of a battle between the David tenants (not of the acting variety) and Goliath landlords is more nuanced than first impressions suggest, however.
Take the case of Blackstone and Telereal Trillium’s The Arch Company, which owns around 5,200 properties in converted railway arches across the country. The Arch Company came under intense pressure for their stance that tenants, the majority of which are SMEs, were going to have to pay their rents in full. The opprobrium heaped on them by the public and the media eventually had the desired effect though and The Arch Company relented, announcing that all tenants would enjoy a three-month rent-free period. This follows the government announcement last week that businesses unable to pay their rent because of coronavirus will be protected from eviction for the next three months; the unintended consequence of which was to pass the problem onto landlords.
However, while it was easy to characterise this as a David vs Goliath battle, with the sympathies of the media and general public clearly on the side of the small businesses as opposed to Blackstone and their $325bn (£260bn) global property portfolio, this is too simplistic and potentially harmful. While many are calling for landlords to be sensible and pragmatic with relation to their leases, this assumes that they have the capability to be so and ignores the fact that landlords are businesses and might need support too.
These are unprecedented times, with the government stretched in every direction in order to prop up the UK economy, but those in charge must consider exactly who these landlords are.
For example, when looking at the legal battle which is being threatened by landlord Criterion Capital against its non-paying tenant Caffe Concerto at face value, the sympathies of the public are probably going to lie with the tenant they’ve actually heard of and potentially used, rather than the faceless private equity firm. However, behind many of these landlords are entities that we may be more sympathetic towards, with a large proportion of the capital in the real estate sector coming from the pensions and savings of the British public. In fact, the IPF estimated that 30% of all defined contribution pension schemes currently invest in property.
At a time when much of the British public is seeing their income squeezed, the potential collapse of any of these landlords could have a very real impact on the savings and pensions of people up and down the country. Therefore, it is vital that the government does what it can for landlords as well as tenants, and the talks currently taking place between the government and landlords will be keenly followed by many.
With coronavirus grinding the economy to a halt, there are no easy answers to such intractable problems. The government must ensure it listens to both sides of the story; despite appearances, Goliath needs support too.