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  • Writer's pictureCharlie McVeigh

Lessons from The Great Fire for Landlords and Operators

Anyone who went to school in this country knows that Great Fire of London started in a bakery on Pudding Lane just off Eastcheap on 2nd September 1666.

Something like 13,000 buildings and 90 churches were razed to the ground over the next four days. Then, as now, tenants were liable for the cost of rebuilding. The insurance industry did not exist, in fact these events triggered its creation. In the seventeenth century most commercial tenants lived above the shop and so were made homeless and forced to flee the capital.

To make matters worse, the City Aldermen passed a statute that all new building be in stone, not wood as had been standard until then. This seemed sensible, but it dramatically increased the cost of construction.

On New Year’s Eve 1666 Samuel Pepys wrote: “the City is less and less likely to be built again, every body settling elsewhere, and nobody encouraged to trade. A sad, vicious, negligent Court [Government], and all sober men there fearful of the ruin of the whole kingdom this next year; from which, good God deliver us!”

Sound familiar? In 2020, those of us who lease premises in the City, Canary Wharf and other financial districts find ourselves in a similar position to the homeless tenant-victims of the Great Fire. The reaction to Covid from Government has made hospitality and retail the first link in a chain of value destruction which may take in landlords, banks and ultimately the pension funds upon whom we rely for comfort and security in old age.

Our premises may still be standing, but they are effectively valueless. Footfall is negligible, customers nowhere to be seen. It’s Zombie Apocalypse without the zombies. Astonishingly, many find themselves uninsured, despite having paid through the nose for business interruption insurance over years. Even those canny enough to invest in specific pandemic cover have had to go to court to try to get paid.

Notwithstanding the vaccine-cavalry coming over the hill, many expect a further full lockdown in January-February and our rulers seem to feel we won’t be out of the woods until either April 2021 (Boris) or July (Gove). Incredibly, the Opposition want to lock down even more, not less. The Government, unwilling to get involved in private contracts between landlords and tenants, and presumably feeling it has more pressing fish to fry, continues to kick the can down the road with extensions of the leasehold forfeiture moratorium.

But intervene they will have to. The UK property market is broken. Many on all sides of the debate have long bemoaned the upwards-only rent review system. The burden of property tax is unfairly shouldered by tenants. Soaring rent, rates and regulation have made retail and hospitality a soft target for on-line retailers. And now we find ourselves being sucked into a black hole where the financial system itself may be at risk because vast numbers of tenant-companies have found that CVAs, pre-packing or just plain-old liquidation is the only option.

In the years after 1666 the challenge facing the government was how to rebuild the City of London. As now, landlords relied on tenants to rebuild. As above, tenants were not insured and had in any event fled the capital. Both sides faced bankruptcy.

The ingenious solution was the creation by Parliament of the ‘Fire Courts’. These effectively performed a mediation service between landlords and tenants and ultimately dispensed summary justice on the allocation of costs to rebuild premises. Justice was swift, as many as ten cases a day were heard. Fascinatingly, after the first few months, both sides could see the trend on Fire Court judgements and began to mediate among themselves and to bring the resulting agreement to court to be stamped. Once landlord and tenant had a ruling, they could go about raising the finance to build anew.

Of course, the challenge facing the Government now is more complex. There is no single concrete goal like the rebuilding the City in the late 1660s. The challenge facing us is not universally shared. A cursory reading of Loungers’ results this week would cause a child to see that those who operate in suburbs and market towns may actually be better off than they were pre-Covid. Reilley & Co’s share price would suggest as much. On a Zoom call recently, I heard an operator even older than me say he hadn’t seen a market this benign for expansion since 1993.

But a solution must be found. We must not suffer all of this pain and disruption to society, the economy and our children’s futures without at least rebuilding better. We have to create a system for building, leasing and taxing property which is sustainable and allows the financial districts, town centres and high streets alike to thrive and be able to compete with the invisible billionaires of Silicon Valley.


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