High St heavyweights go to war with landlords

Depending on the outcome we could see the biggest shake-up in the way commercial property behaves for years. At issue are rents and the traditional demand from the landlord that tenants pay them quarterly in advance. The shopkeepers, led by Sir Philip Green and Lord Harris have had enough.

They're gearing up for next month, when the quarterly payments become due, to say no - from now on they want to pay rent monthly. Other retailers, representing thousands of shops, have joined their cause.

Their case is that when times are hard, to demand payment up front, so far ahead, is iniquitous. It's also unique - nobody else imposes such a demand.

And make no mistake, it is tough being a retailer at present. The Office for National Statistics has declared that retail sales fell 3.9% in June - the sharpest drop in the past two decades. Every day, seemingly, a chain issues a profits warning or worse, seeks administration.

The argument is not a new one - indeed, for two years, the British Retail Consortium has been campaigning on the same cause. What is different and what has caused the property industry a serious bout of apoplexy is that these retailing heavyweights are seeking to tear up existing leases.

Under pressure from the BRC, the landlords have started to make noises that they will view future leases differently and that yes, they may be willing to agree to monthly rents.

Green and Harris want more - they're determined to rewrite current contracts.

For their part, the landlords are indicating they will stand firm - they are not going to redraft agreements already in place. They say that to do so undermines the whole purpose of a contract covering five years, 10 or longer. To rip up those deals now is unfair to them, their cashflows and projections will be severely affected.

To which, the answer from the shops is, "get real, a lease is no different from any other supply agreement. We can vary the terms of a lease the same as we can with any supplier."

There's no danger, they stress, of them seeking the breaking of covenants or non-payment of rent - it's simply a case of them wanting to alter the payment period.

In the past, I would have predicted the property firms would win, hands down. But now I'm not sure.

The shopkeepers have cleverly chosen their moment to strike. The unavoidable truth for the landlords is that while trading is tough on the High Street, their own sector is in terrible, possibly far worse, shape.

If the retailers threaten to not pay their rent until their demand s are met, the property owners are put in a desperate position. They will not find other tenants to take their place in this climate - the balance of power has shifted away from the landlords towards the occupiers.

Green and Harris sense that, which is why they've decided to declare war. They also know they're talking about a collective rental for the estates of £2.5 billion a year. They've got the landlords over a barrel and they know it. The property barons may huff and puff and consult their lawyers. They may be told they've got a solid argument. Whatever. My money is on Green and Harris.