Rent quarter day ‘poses cash flow crisis’

As landlords and tenants face up to today’s rent quarter day, a property expert has given a stark warning that a cash flow crisis is imminent.

Rent quarter day ‘poses cash flow crisis’

Professor Barry Gilbertson, specialist real estate partner with PricewaterhouseCoopers, says that with the support shown for entrepreneurs in Tuesday’s emergency Budget the June 24 rent quarter day might not be as bad as some commentators have feared.

“However, the risk of tenant failure is still one of the biggest issues facing investment property-owning landlords across the country,” he says.

“The often overlooked risk, at this point in the economic cycle, is companies enthusiastically over-trading as they try to emerge from the recession. Over-trading can result in a cash flow crisis as working capital gets soaked up with new orders.

“If the buyers of those new orders do not pay their bills on time, or even become a bad debt, then the squeeze on cash flow gets tighter and, on quarter day, it becomes harder to pay the interest to their lender, to pay their tax bills for PAYE and VAT, and, of course, harder to pay the rent.

“Suddenly, the landlord’s cash flow is also under pressure,” he goes on, “and the downward spiral can escalate, just when those elusive green shoots were beginning to take root, and everyone hoped that they would bear fruit in the summertime.”

Check Also

Spring Fair returns

Spring Fair, the UK’s leading marketplace for wholesale Home, Gift and Fashion which returns to …