Property chief lambasts ‘scandalous’ insolvency practices
THE chief executive of regional landlord, The Hollins Murray Group, has used his annual review in the firm’s accounts to criticise the “scandalous” behaviour of retailers and administrators.
Nick Casson is particularly aggrieved at the way administrators – not liable for debts prior to their appointment – are often called in shortly after quarterly rents are due.
He also feels that pre-packaged administrations, where a sale is agreed prior to a formal insolvency appointment, “make a mockery” of contracts.
Altincham-based Hollins Murray, has around 50 properties including a number of retail interests in Flint, Ashton-in-Makerfield, Prestwich. It was affected by the insolvencies of Game, Walmsleys and Peacocks during the year to August.
Mr Casson said: “In recent times the number of insolvencies, typically via an administration, affecting the property market has risen and some of the practices adopted by retailers and administrators have been nothing short of scandalous.
“Recent case law has shown that administrators are not liable for debts due prior to their appointment which has led to many insolvencies being timed to occur just one or two days after a rent quarter day.
“Because a landlord is unable to distrain during an administration the administrator refuses to pay any rent until the next quarter’s rent becomes due thus enabling them to trade from the premises for nothing for a very significant period of time.”
He added: “Similarly many struggling retailers have chosen pre-pack adminisatrations or company voluntary arrangements as a means to walk away from liabilities. In the case of retail property this has enabled operators in poor health to close unprofitable stores and renegotiate terms very aggresively for those they wish to keep.
“This cherry picking and the timing of administrations both make a mockery of the contractual relationships between landlord and tenant and I hope that collectively various property federations, the government and the courts do something to reverse these plainly unfair and unethical practices.”
In the year to August turnover at the group was static at £6.8m while pre-tax profits dipped from £2.4m to £1.7m. Its property assets were valued at £98.9m, up just £500,000, but the business said some properties had fallen by as much as 20%, while other have increased. Generally multi-let properties fared better than single lets.
The group is in the process of renegotiating a £38.8m facility with the Royal Bank of Scotland and a £16.8m loan with Lloyds, both due to mature later next year. Based on borrowings of £55.6m at the year end, the group’s loan to vale ratio is 56%, and its void rate fell slightly to less than 3.5%.
