Today, the 25th of March, is a “quarter day”. The significance of quarter days is now limited, although leasehold payments and rents for business premises in England are often still due on the old English quarter days. In the Middle Ages, when rent was collected on horseback, four times a year was the frequency felt to be most practical. In order to help tenants remember due dates, the dates selected coincided with festivals in the Church calendar. These are the “usual quarter days” still enshrined in most leases. In these days of instant everything from messaging to gratification, this seems at best quaint, at worse a pointless constraint, yet here it is built in to modern, enforceable contracts.
Normally, reform of this kind of nonsense would be somewhere near the back of the queue for remedial legislation but there is increasing evidence that it is causing real harm to retailers particularly. The British Retail Consortium, for example, has called for an end to quarterly rents and for monthly payments as standard practice on all new lettings. The particular problem identified here is the strain put on cashflow by having to find three months rent as a lump sum rather than a more regular outflow. This is, of course, exacerbated by the current retail downturn.
Setting aside an apparent inability to plan cashflow. this is actually a problem that affects all tenants and how their tenancy is managed. Given their current arrangements many landlords are opposed to change on the grounds that monthly rent collection would increase their administrative burden or that of their managing agents. Additional rent demands would need to be prepared and dispatched and, clearly, issues of late payment, notice etc need to be addressed.
I lease a car (outside the Landlord & Tenant Act!). I make the monthly payment by direct debit. I am not bombarded with monthly demands from Audi, I get an annual statement. As far as I know, Audi do not employ agents to collect this money, there are no clunky rent collection systems involved, nor people using dubious collection rates as a measure of performance – the payment is made every month on the designated day. My cash flow planning is simple and transparent.
There have been a number of initiatives in this area. As well as the BRC, a consortium of large retailers led by Sir Philip Green have wrung some limited concessions from property owners by exercising their buyer power. The British Property Federation, after much deliberation, have conceded that monthly rents are “consistent with the 2007 lease code”. Nobody seems willing to grasp the nettle here - save with the protection of some very thick gloves.
It seems blindingly obvious to me that all property leases should be paid monthly by direct debit. Such a reform would save landlords significant sums of money by making the income available on time all the time. It would also dispense with the need to buy rent collection experts and the assorted paraphernalia that purports to manage rent collection. Property managers would be free to manage property rather than collect rents.
Finally, it would allow tenants to better manage their cash flow and, in this kind of market, it could allow rental levels to be more flexible - given the landlords savings.
It would transform a 16th century system into a 21st century one in one jump.