Stuart WoodWithout regulations on rent, many UK venues are facing a second crisis – paying their landlords. Stuart Wood investigates
“No-one should be profiting from Covid-19. At the moment, landlords are profiting. It’s as simple as that.”
Jeremy Joseph, owner of G-A-Y and London’s largest LGBT nightclub Heaven, puts it plainly. The UK’s music venues are collectively facing an existential threat. Covid-19 has forced their closure for the foreseeable future, and some landlords seem to be using the opportunity to turn a profit, charging full rent to businesses with zero income.
It is fair to say the government is aware of these issues, but as of yet there has been no official guidance about how businesses are expected to deal with rent, which is in many cases their biggest expense. For the bars, pubs and clubs that are unable to bring any money in during lockdown, it could be fatal.
What the government has done is to establish a three-month ‘crisis period’ in which tenants cannot be evicted. Businesses are advised to negotiate with their landlords on a discretionary, case by case basis. But Joseph says there are loopholes being exploited.
“Landlords are playing a very clever trick,” he says. “The government has said that you cannot evict a tenant during the crisis period of the next three months. So instead, they are deferring those rent payments. That means as soon as those three months are up, and you’re three months’ rent in debt with no income – oh, look – now they have the power to evict you. It’s a very dangerous game being played here.”
Joseph took his frustrations public after receiving no word from government about the rent situation in the UK. He says he wants legally binding regulations for landlords, in order to prevent them profiting from vulnerable businesses. Specifically, Joseph mentions The Arch Company (ArchCo), RDI REIT and Soho Estates, which respectively own the leases on Heaven, G-A-Y Bar and G-A-Y Late.
ArchCo says it is offering three months’ rent free to small businesses, although the parameters that define ‘small business’ are not entirely clear. Adam Dakin, Managing Director, said: “We are very concerned about losing music venues, particularly small independent ones, which is why we are offering three month rent-free periods, not just deferrals, to small independent businesses. We are also talking to some of our larger venues on a case by case basis to see how we can help them through the crisis.”
A spokesperson for RDI REIT commented that “we continue to engage with all our tenants and offer support where we are able to do so. Joseph, however, says the company has not replied to any of his recent emails.
John James, Managing Director of Soho Estates, spoke to Access and explained his company’s position: “We are very aware that the hospitality sector will be the last out of lockdown and will then take the longest to recover. You must also appreciate that landlords have their own financial obligations and are usually held by bank covenants which if breached will result in property companies going into liquidation.
“We have contacted all our tenants and with only a few exceptions have come to agreement on how we help them survive and look to recovery.”
Financial pressure
It may be in the interests of landlords to turn over new tenants for one simple reason: existing tenants must be negotiated with when it comes to price, but new tenants take whatever price is offered. That usually means one higher than before.
Beverley Whitrick is Strategic Director at the Music Venue Trust (MVT), a registered charity which acts to protect, secure and improve grassroots music venues. She says the rent problem is widespread, and very serious: “One of the fears that we as MVT have voiced to the Department for Culture, Media and Sport is that some landlords may be using this as an opportunity to get rid of low-paying music venues, and potentially put in something they believe will earn more money.”
Whitrick also points out that many venues in London are not eligible for business rates relief, as their rateable value is over £50,000. This figure, she says, is all to do with the value of the property and not the turnover of the business. “If a grassroots music venue happens to be in an expensive area, it doesn’t mean that business has more money. They should be entitled to breaks in the same way similar venues valued below the threshold are,” she says.
Both of these problems are putting immense financial strain on the UK’s venues, and Whitrick says the future is bleak unless something changes quickly. “Right now, we are looking at a really terrifying percentage of closures. The conversations about rent and business rates are the ones that need to be had immediately, so we can sustain as many venues as possible.”
John James, MD of Soho Estates, said: “I think it is absolutely nonsense to think that there is a motive to reduce venues.
“I suspect there will be a casualty list, because the small venues are often run very hand to mouth so it depends how you wish to interpret.”
Roots of the EartH
Auro Foxcroft, Director of Hackney venues EartH and Village Underground, echoes the warning from Music Venue Trust. “What happens if half the grassroots venues in the UK shut down? The whole music ecosystem will suffer from that,” he says. “Kicking the can down the road, it won’t be long until the next generation of festival headliners won’t have anywhere to build their careers.”
Still, Foxcroft sounds a note of optimism: the small and medium sized venues that are able to survive the Covid-19 crisis may be more flexible once the dust settles. “Our sector is in a great position – theoretically – to get straight back into business once lockdown is lifted. After this, people are going to be desperate to go out and dance. Also, because a lot of festivals are cancelled, there might be a wave of major artists milling around who would be more open to playing the smaller venues that reopen first.”
Foxcroft is also keen to point out that not all landlords are using the lockdown as an opportunity to turn a profit. His venues are overlooked by Hackney Council, who he says have been very helpful. Likewise, Joseph points to TFL and Crowne Estates as doing “the right thing” by offering rent breaks to struggling businesses.
But there is a very real possibility that the UK’s small and medium venues could be decimated, as much by stubborn landlords as by the virus. The furlough scheme for staff was only one half of the puzzle – the other half is rent. Urgent action is needed to address the situation, before more key cultural institutions are lost.