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Landlords oppose tenants’ bid for total rent waiver

By Wainaina Wambu | April 16th 2020

Property managers and real estate agents grappling with falling business want new measures put in place to enable landlords and tenants to “share the pain” to prevent massive rent defaults.

This is as reduced salaries, slow business and careful spending hit the economy hard, with some property owners projecting huge losses.

Some tenants are also taking advantage of the situation not to pay rent.

Options mooted to minimise losses for landlords include rent holidays that can be extended up to the end of the lease, rent reductions, discounts and deferred payments without interest.

Landlords have also been asked to continue negotiations on loan servicing with their banks during this time.

Knight Frank Managing Director Ben Woodhams, who acknowledged receiving a “stream of letters” from tenants asking for rent holidays, reliefs and waivers, said some tenants were just taking advantage of the situation.

“It seems to me that tenants just make an assumption that it is jolly nice for landlords to collect rent and now want them to turn off that tap and help them out, but that is not the case at all,” said Woodhams.

He explained that if rents were not paid, landlords would be unable to pay for things like service charges or security for the buildings.

He said the slashing of rental income taxes could be a viable option.

“The consensus is that landlords and tenants must share that pain and to me that would be a full-service charge and a 50 per cent reduction in rent because the service charge is keeping the building going,” said Woodhams.

Value chain

Woodhams was speaking at a webinar dubbed ‘The Impact of Covid-19 on East Africa’s Real Estate Market’ that brought together experts from the industry.

Broll Property Group Managing Director for East Africa and Indian Ocean Jess Cleland said the entire real estate value chain stood to suffer.

“The expectation that landlords must bear the entire pain of the situation is unfair. The most important thing here is to just communicate, sit down and have a discussion and look at your options. It will be worse if tenants just stop paying rent,” she said.

Fedha Group Chief Executive Dhruv Pandit warned that the call for a 50 per cent rent relief was unviable due to a diverse portfolio mix of real estate agents.

Some real estate sectors including industrial and warehousing, he noted, might emerge as winners from the pandemic.

“Cargo ships are going to be constrained as people make more orders to keep stocks especially in the supply chain in case of any future disruption,” said Pandit.

The Fedha Group boss observed that the hospitality sector, where thousands of jobs have been lost, is the most affected due to high operating costs at a time of zero occupancy.

Though the retail sector is the hardest hit, anchor tenants such as supermarkets have been busier, according to Woodhams.

In malls and other buildings, supermarkets and pharmacies are recording brisk businesses - having been identified by State as essential service providers.

Gerhard Zeele, Divisional Executive Commercial Property Finance Nedbank South Africa, said the depreciation in African financial currencies would also hit landlords and property developers who were servicing their debt obligations hard.

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