Multiple casual dining companies in the UK, including Yo! and PizzaExpress, are on the hook for rent at sites they no longer occupy after passing on leases to operators that have since gone bust, leaving them with extra bills at a time when few can afford to pay their own.

Under clauses known as authorised guarantee agreements, operators that exit a site and agree with the landlord to pass the lease to another chain, can subsequently find themselves having to cover the rent if the new occupier goes out of business.

“[It’s an] unbelievable feature of the market that in healthy times doesn’t matter much but under Covid it’s a chain reaction. It will go down like ninepins,” said Hugh Osmond, whose company Various Eateries owns the Coppa Club and Strada brands.

Various Eateries is liable for the rent on 13 sites that it no longer occupies and that were reassigned to brands including the burger chain Byron and Zizzi’s owner Azzurri Group, which have both gone into administration because of coronavirus.

Mr Osmond said that ahead of listing Various Eateries next month, he had been negotiating with landlords to amend the AGA clauses. If the landlords had claimed the lost rent, he said, “it would have been millions”.

Yo!, the sushi company, has included nine similarly unoccupied sites in an upcoming company voluntary arrangement — a process used by operators to cut lease costs and withdraw from underperforming sites. PizzaExpress, which announced plans to close 73 branches through a CVA last week, also said that it had a number of AGAs among its leases but would not disclose how many.

Casual dining groups are operating on a knife-edge following three months of enforced closure due to the coronavirus crisis.

The sector, which had been loaded with debt following a private equity-fuelled boom five years ago, was already in a precarious position before the crisis began. Despite being allowed to reopen on July 4, many have not paid rent bills since March and are operating at reduced capacities.

At least 15 national brands have undergone administration processes or put themselves up for sale in the past five months, leaving operators that previously leased those premises worried that landlords will come after them to recover lost rent.

Mark Derry, executive chairman of Brasserie Bar Co, which owns the Brasserie Blanc chain, said that AGAs were a symptom of commercial leases favouring landlords.

“I have a huge amount of sympathy for landlords at the moment. They have their own debt and their own problems . . . but there is a change required in the lease structures in order for us to move forward. They are incredibly one-sided in how they are written,” he said.

But Katherine Campbell, who leads the real estate disputes practice at law firm Reed Smith, said “landlords are at a point where they feel they have to pursue these arrears”. UK property owners and their investors are losing roughly £1.5bn every three months in unpaid rent, according to Remit Consulting.

As a result, said Ms Campbell, landlords are growing more hard-nosed with tenants, ahead of a reckoning in September when a government-enforced moratorium on evictions for businesses that cannot pay rent ends.

AGAs were very common, particularly in the casual dining and hospitality sectors, said Ms Campbell, because of the high turnover of units compared with the lengths of leases. Where a previous tenant had handed over the lease, an AGA was almost certain to be in place, she said.

Under the AGAs, property owners are permitted to collect up to six months rent arrears from previous tenants, and are moving to do so ahead of September 30, the date at which payment is due for the fourth quarter of the year, she added.

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