The small businesses joining forces to get a better deal from their landlord

Upset at the lack of support given to them during the virus crisis, tenants on an industrial estate in east London are fighting back, writes Hazel Sheffield

Cabinet makers Plykea received a court order for late rent payment while in lockdown (Plykea)

When lockdown started, Tim Diacon assumed the worst. His start-up, Plykea, has a six week lead time in between consultations with customers and manufacturing plywood fronts to Ikea cabinets in their light manufacturing unit in the Fairways Business Park in Leytonstone, east London. Diacon looked at the books and tried to work out what would happen if he had no business, but had to continue paying rent for three months.

In the end it wasn’t that bad: Plykea used the government furlough scheme, and in May business started coming back. June looks like it will be busy. Diacon was able to keep paying his rent. So he was surprised to receive a County Court judgement, a court order telling him to pay money owed to a debt, from his landlord, Capital Industrial, in June, with the addition of court fees and a further 20 per cent.

When Diacon asked around, he discovered that other tenants of Capital Industrial had received similar judgements and uneven offers of rent deferrals – despite a government ban on the use of statutory demands and landlord evictions from commercial property that has been extended until the end of September. At the time he received the letter, Diacon says his June rent was 15 days overdue, because Plykea had cancelled its direct debit in order to try and manage its cash flow.

“What I find unbelievable is that the reason we have had to pay rent a little bit late is to ensure we can pay our staff and keep everyone’s jobs safe, yet they see this as an opportunity to penalise and threaten our business and in turn the jobs and security of our staff and their families,” Diacon says. “Against a backdrop of people actually dying trying to help others. It’s disgraceful.”

Diacon has joined with other tenants of Capital Industrial properties to form the Capital Industrial Tenants’ Association to try and secure a better deal from the landlord. Together, more than 100 tenants are calling for Capital Industrial to establish an ongoing dialogue with tenants, beginning with a meeting with decision-makers to address the urgent issue of court summons and other threats against members.

“This is a huge injustice that is making a lottery of survival,” says Tallie Maughan, creative director of In Production, a ceramics studio in a Capital Industrial Unit in Argall Avenue, east London. Her business operates across four sites in east London, with four different landlords. “This business operates from a Capital Industrial site, and Capital Industrial has not offered support,” she says.

Maughan says the approach of Capital Industrial stands in contrast to other commercial landlords that have worked with tenants to offer rent holidays and other measures of support designed to keep businesses going. Landsec, another of the UK’s leading commercial property companies, has established a support fund to provide up to £80m of rent relief for customers who need help to survive, focusing on those in the hospitality sector with limited access to other sources of help. Workspace Group, the former landlord of many of Capital Industrial’s properties, has given the majority of its customers a 50 percent rent reduction until the end of June, with ongoing deferrals on a case by case basis.

Capital Industrial is a real estate company registered in the Netherlands and controlled by the Washington State Investment Board, a pension fund for public-sector employees including teachers, firefighters and judges across Washington State in the US. On its website, Capital Industrial claims to be the largest owner of lettable space by number of industrial units in London, with around 2.8 million sq ft of space.

Capital Industrial tenants that spoke to The Independent said they had been offered one and a half months worth of rent deferrals, repayable in full by 30 September. “That’s pointless, it doesn’t do me any good,” says Allen Pelling, founder of TG Productions Ltd, a club promoter and events company with 30 years experience. Pelling and his company moved into a Capital Industrial unit in Argall Avenue in June 2019 and have spent £70,000 doing it up.

TG Productions cancelled its events from March onwards as the coronavirus took hold. “By March 19 all our orders just stopped,” Pelling says. “Events are going to be the first to go and the last to come back. I’m still paying my rent and we have a bit of cash reserved, but if this continues past October and into next year I will have to lay staff off and look at dissolving.”

Capital Industrial tenants are not the only small businesses to find themselves at a critical point in June as their quarterly rent bills become due. At the same time, lockdown restrictions are easing up and many business owners need to start restocking and restarting operations.

Michael Lassman, London regional chair of the Federation of Small Businesses, says London landlords must do more to support tenants. “Small firms in London are struggling with many self-employed individuals omitted from government schemes and many sectors missing out on vital grants, rent and rates support,” he says. “The negative impact of losing businesses would be more people unemployed and empty units that will be difficult to fill. Very few companies are seeking to take on leases and as such we need to see landlords working side by side with their tenants at this crucial time.”

Clare Coghill, council leader for Waltham Forest and London council executive leader for business, Europe and good growth, has also urged landlords to negotiate with tenants about setting realistic rents during the uncertainty of coronavirus: “As we cautiously look to reopen and celebrate London’s diverse and wonderful high streets, we are calling on commercial landlords to support their business tenants and play their part in kick-starting the economy."

Tenants struggling with rent costs should feel able to approach their landlords to discuss requests for support, according to a code of practice for the commercial property market launched by the government at the end of May. In letters seen by The Independent, Capital Industrial has refused to meet with tenants, stating: “Neither we nor any tenant at [the industrial estate] will gain an advantage from the meeting you suggest, in which, we expect, you will ask en masse for a rent reduction or a rent holiday. As we have repeatedly stated, we will not accommodate this request.” Capital Industrial did not respond to requests for comment by press time.

“Our aim is to do things amicably,” says Claire Ashbridge-Thomlinson, of East London Brewing Co, which has spent more than £20,000 on its industrial unit to turn it into a state-of-the-art brewery with modern facilities. She says the Capital Industrial Tenants' Association is following the model of other tenants’ associations such as the East End Trades Guild and Guardians of the Arches, in which tenants have organised to speak collectively to their landlords and to secure tenants’ rights.

“The advent of the Capital Industrial Tenants’ Association could be a really great thing for Capital Industrial,” Ashbridge-Thomlinson says. “It’s a way to talk to its tenants as a body. Coronavirus aside, it could be a great thing.”