Soloman Lew refuses to pay rent

Via The Australian:

In one of the single biggest blows to the nation’s embattled retail sector billionaire Solomon Lew has announced the shock closure of all stores within his Premier Investments business, which includes popular fashion chains such as Just Jeans, Portmans, Dotti, Peter Alexander and Smiggle, with the loss of more than 9000 jobs.

Premier said it intended not to pay any rent to landlords during the shut down, triggering a possible battle with shopping centre owners.

It’s global, via Bloomie:

Major U.S. retail and restaurant chains, including Mattress Firm and Subway, are telling landlords they will withhold or slash rent in the coming months after closing stores to slow the coronavirus, according to people familiar with the situation.

In a brewing fight, chains are calling for rent reductions through lease amendments and other measures starting in April, said the people, who asked not to be named because the discussions are private.

These moves mark the next phase in virus fallout: What happens to billions in rent owed for businesses that have been closed? The stakes are high. Retail has a slew of big chains in turnaround mode. And if they do withhold payments, there would be a ripple effect. Landlords can’t afford to stop collecting rent for long, with many property owners sitting on loads of debt.

REIT rout ahead.

And what’s good for the goose is good for the gander is it not? Previously from Guy Rundle at Crikey:

The Centrelink lines are going round the block, the government has made vague announcements of rent assistance, twitter buzzes with notes from the newly laid-off wondering how they’ll put food on the table and pay the rent and the mortgage.

Here’s a suggestion. Do the former by omitting the latter.

If you have lost most or all of your income, or are about to, don’t pay your rent, don’t pay your mortgage. Write to your landlord or bank and tell them you won’t be paying for the next X months, and that you don’t regard this as a deferral, but as non-rent/non-mortgage months.

There’s a silver lining to every turd dropping from heaven, and the shining fringe around COVID-19 is that it will make it clear just how much of our economy is composed of dead value, non-productive ownership and the payment going to it: the rent.

The rent and the mortgage swallow up 30%, 40%, 50% of our incomes. They go into the maw of a property system whose prices have been ludicrously inflated by the privatisation of urban land development, land banking and the hidden inflation of a decade of quantitative easing; pumping trillions into a global economy in which neither production nor full-time jobs rose to anything like the levels intended.

So don’t pay it. Or negotiate a sharp reduction. Or negotiate a figure which covers part of the rates and part of maintenance and repair. If the landlord says they have a mortgage to pay, tell them to go on mortgage strike.

After the virus comes the revolution.

David Llewellyn-Smith
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Comments

  1. What happens at the top end of town is not the same thing that happens at the bottom.

    The large corporate/trust landlords that lease to Lew have a relationship to think about. They may bend over and parley.

    The little ones that lease to the corner store (or whatever) aren’t motivated by the same concerns.

  2. I am actually considering cancelling my EFT rent transfer (Property over 1k a week – 3 bed in inner Sydney). Is it true there is a moratorium on evictions in NSW? Or is it still in parliament? Tenants for once have the upper hand. I want to claim hardship and ask for a permanent rent reduction.

    • Depends who your landlord is, Dyl.

      – if they’re a member of a bikie gang I’d carry on paying, personally.

      – on the other hand, if it’s a little old lady, I’d put a comforting arm around her (metaphorically, obviously, given social distancing restrictions) and explain gently that you’ll be taking a ‘holiday’.

      • boomengineeringMEMBER

        Dominic, depends on the tenant as well. When I was a landlord many years ago my physique was daunting to most but didn’t faze the tenant a serial non payer who didn’t pay from day one. From memory they had about 3 months of non payment before eviction and even then a lot had to be done otherwise they could extend that time.
        edit = that was the days before the internet easy access to your rental history.

        • I was only puling his leg, boom. I know nothing about the IP game having not been a landlord before — that said I have been ripped off more than once by landlords producing spurious excuses for why they wouldn’t return the bond.

          • You can lodge the bond return request yourself on the day you move out. You do not need the RE agent’s approval to do this.

            Once lodged, if RE agent wants to try it on with spurious claims, it will cost *them* $250 to lodge an NCAT case (NSW obviously), rather than costing *you* $100 to lodge it after they try to keep your money.

          • You can lodge the bond return request yourself on the day you move out. You do not need the RE agent’s approval to do this.

            Once lodged, if RE agent wants to try it on with spurious claims, it will cost *them* $250 to lodge an NCAT case (NSW obviously), rather than costing *you* $100 to lodge it after they try to keep your money.

          • Two times out of my last three rentals I’ve had to take on the Land____ at NCAT after they claimed my bond.
            Both times resulted in a win. Didn’t cost me a cent, other than my valuable time. But it was worth it to put them in their place.

          • You fellas must be a lot younger than me. When I got ripped off it was done on the basis of an illegally reproduced agent’s contract – Tippexed and photocopied multiple times over – back in the days when Tippex was a thing (so, a long, long time ago), and a handshake. Predated the bond scheme, anyway.

            Basically I didn’t have a leg to stand on and the landlord knew it.

    • Unless the zombie apocalypse comes any moratorium will end at some point. What happens then? If there is still more demand than supply for inner city rentals and you have a black mark for non payment of months worth of rent you will probably never get a rental again. If yopu want to roll those dice go ahead. Personally I’d be a little cautious though.

      • Good advice.

        There’s no harm in asking for a reduction for the next, say, 3 months though. If it’s not a fixed lease and you can walk away with a months notice, the landlord should be realistic to know that they are unlikely to get a new tenant any time soon at the same rent.

        • Exactly – I actually got the rent reduced $50 a week when I first took the place because it was on the market for ages – so there would def be no interest now.

    • Short CapitalismMEMBER

      I’d communicate first unless you want to risk being blacklisted and/or having your credit score downgraded. Also if people start falsely claiming hardship just because they think rents are too high will just increase the suffering of those legitimately are unable to pay (however they got into that situation).

      • yes, can people let me know the downsides of doing this? My landlord is actually the boss of the real estate agency I lease through – if that is of relevance. So I’d like to kick them while theyre down 🙂

    • codeazureMEMBER

      You have to be able to prove that you suffered financial stress due to wuflu. Be careful if you have cash reserves or can’t show loss of job, etc, puts you in a tricky legal situation (but legal advice, don’t listen to random guys online…)

    • From what I have heard we have ceased to hold NCAT (or VCAT) tribunal meetings. So as far as I know there’s no process for a landlord to seek eviction without first going through an NCAT hearing (no NCAT = no Eviction)
      I could be wrong in that there might be other avenues for landlords to pursue but the normal process is through NCAT and with NCAT shut down it is fairly safe to say that it will take any normal landlord at least 6 months to achieve an eviction order, and even then there’s no guarantee that the Sheriff’s department will act on this order (lock-downs etc)

    • Won’t you just get sued for the rent you avoided? Not seeing the brilliant plan here. You might get bankrupted over non-payment of rent that you never had a reason not to pay to begin with.

    • The problem is, for you, getting blacklisted.

      I think you will need to negotiate a rent reduction, citing hardship.

      I’m in the same boat (my business has been smashed, as I can’t meet people and acquire new work – engineering consultant).

      We’re currently paying $480/week for a crappy house, and are thinking about offering $300 or $350/week or so, citing hardship.

      I also don’t think it’s fair to speak about cash reserves – the landlords are getting debt holidays, but no one is saying they should have cash reserves to just dip into and suck it up.

      There can’t be double-standards here.

      Genuine market forces, IMHO – if you can’t pay as much rent, then you can’t. Negotiating a reduction is the appropriate market reaction, especially as it’s currently very hard for tenants to just move and seek the next market price point.

      I’m waiting for the NSW govt’s statements on evictions – I think it’s due today. I intend to contact the tenancy union and speak to them about it before probably offering a new ‘temporary’ (market relevant) rent price.

      • Landlords are not getting ‘debt holidays’. The use of this terminology was a MASSIVE mistake.
        Mortgage holders can apply to DEFFER their payments for up to six months. Interest still accrues and so does interest on that interest (havn’t seen anything to suggest otherwise?)

        So there is a clear disconnect here to what tenants are demanding (ie not paying ever) and what landlords can do (they still have to pay the bank eventually)

        • No, you are correct. For me I don’t have to pay my mortgage for 6 months but the interest will capitalise. Then for the following 3 months I pay my old monthly repayment (ie before the pause). And after that, they recalibrate the monthly payments for the higher outstanding principal (that is, the term is still the same). Given the term of the mortgage, that will be a relatively small amount per month.

          In the end, if everything just sits in my offset there will be no overall difference but it is nice to know that there is a decent buffer there.

      • My real estate here in qld went from a stern email on Sunday (before scomo shut it all down) saying pay the rent or else, to a bit nicer email yesterday saying keep in contact if you’re struggling, let us know what you can pay and when you can pay it and we’ll see what position your landlord is in with the classic “don’t forget they have a mortgage to pay too” lol. My landlord owns the property outright so this could actually be their only source of income.

      • ” the landlords are getting debt holidays, but no one is saying they should have cash reserves to just dip into and suck it up.”
        Do you actually understand how the debt holiday works? The landlord will still have to pay back everything they would have anyway without the debt holiday, + an aditional 6 months interest. Unless you intend to pay back the additional rent in the future it isn’t really comparable,

    • What if I don’t stop paying totally – but get in contact and say the current market warrants a reduction in rent and have had my hours at work cut (which is true)? There are definitely comps in the area that are $300 cheaper – same bedrooms – maybe not AS nice as my place – but still decent.

      • Also I’ll add the 12 month lease was up ages ago – so now I’m just on a periodic? I think? Dunno how that works..

        • Mining BoganMEMBER

          Ours has just rolled out of lease and we’re not saying a thing. There will be many cheaper options coming up both buying and renting.

          In the mean time we’ve just got new air-conditioning and a new oven, and the owner was pleased that I fixed the toilet so she didn’t have to pay some thieving plumber. Also don’t have to sweat those big new cracks that appeared after that long dry spell.
          She knows rent isn’t a worry for us so we’re rolled gold for her.

          What a time to be alive.

      • You can only ask, otherwise you will continue to pay your current rent. I’m sure he’d be keen to lock you in for another year at the moment (although ego can play a big part). Go back to him with examples of rent being advertised for similar properties (that way he knows you’ve been looking) and say you should split the difference.

    • Cancel your EFT authority anyway. No-one – other than the bank holding your mortgage – should have the ability to automatically draw money from your account.

      RE agents may tell you they only do Direct Debit but if you’re already in the property, the path of least resistance for them is always going to be giving you their bank details, rather than letting a rent payment be missed.

    • Ooooh. Is he going to be offloading any bikes soon?

      I can see myself rocking some black leathers on one of the nicer bikes….

      • blacktwin997MEMBER

        You ride Peachy?

        As some actual content I have a friend who once hired a dirt bike from this Garner’s outfit, said they resembled the cast of ‘Deliverance’ but were genuinely nice folks. Said friend was quite the large gentleman and he opted for one of the smaller dirt bikes (budget etc.) so the overall effect was one of a circus bear wobbling along on an undersized tricycle and into the undergrowth. Good times.

    • That landlady is a bit slow on the uptake, she’ll be begging people to take it soon.

      He should just use some delaying tactics until she catches up with the current situation.

      • roylefamilyMEMBER

        I told him just that. It’s hard for folks to think it through when the stress is ramping.

  3. Another very important point in the article cited is that Premier Investments has 70% of it leased premises either in hold over (lease expired rolling month to month) or is expiring in 2020.
    Old Solly Lew will cut rent to the bone and exit dud sites.
    This one is going on my stocks shopping list – waiting for the late Autumn sale at the ASX

      • If he were a rat in a bucket of a bunch of other rats he’d be the last one alive, fat, happy and mentally well adjusted.

        • Seems like he’s done pretty sh!t with MYR. Talented operator no doubt, but not some sort of 4D chess Putin.

          • Yeah he obviously didn’t the seismic tech and social changes properly but within a more narrow set of criteria I’m sure he is pretty switched on. And that is the key to making smart investment decisions, getting everything right, not just part of it.

  4. Some contracts have “force majeure” clauses to cover events like this. I guess it all flows down the chain from tenent -> landlord -> bank/REIT (-> govt?). If there is no money at the top, its hard to see how money will flow to the bottom. Maybe we will get a reset out of this so that commercial rents are set at a new lower level.

  5. Diogenes the CynicMEMBER

    Its clever – he will put the biz into care and maintenance, do some online in the meantime to reduce stock, then when things pick up open a few select stores with much reduced rent. Retail needs a smaller footprint going forward so this is accelerating that.

  6. pity us small tenants can’t do a lew. funny that, helping larger tenant client’s with a “lew” but personal ….

  7. david collyerMEMBER

    Clever Solly. Shrug off the wage and rent obligations immediately, revisit post-pandemic. There will be plenty of eager labour available the moment Morrison later withdraws the Virus surcharge from the dole.

  8. BoomToBustMEMBER

    How long before Myer shutters permanently. We had it pegged to close in 2020 before covid19 as it is the weaker of the competition for department stores vs Davis Jones