
'Dogfight' looms as landlords start suing restaurants over unpaid rent - finphil
https://www.thisismoney.co.uk/money/news/article-8187559/Dogfight-looms-landlords-start-suing-restaurants-unpaid-rent.html
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papeda
I find this question hard to think about. Who exactly _should_ be pricing in
the risk of something like this happening? On both sides there are agents who
have taken on risk. Some of the agents paying rent overextended themselves
even before the crisis. Some of the agents renting space did the same. So who
should take the hit? Nobody (i.e., the government)? Even that solution seems
wrong -- do we really want to incentivize agents that leverage their property
holdings to the hilt?

My naive reaction is that the agents renting space are somehow "more able" to
absorb the costs. Maybe it's because I think banks seem to be doing ok, and in
my head banks are the people who lend things to people and charge fees,
whereas my friendly neighborhood restaurant seems to be scrabbling harder to
make ends meet. Or maybe it's because I think people who own resources are
just always doing better than the people who rent them. But that's not a very
convincing argument.

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matz1
The mistake is the landlord didn't take payment upfront, 6 month / 1 year.

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eropple
That's sure a reasonable and thoughtful idea in industrialized countries where
most workers live close to hand-to-mouth.

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matz1
Then the landlord bear the risk of non payment.

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raincom
This is what happens when people drink the deadly cocktail mix of low interest
rates and leverage. A landlord who has paid off mortgage can afford his tenant
to not pay rent for a couple of months. That's not how the world is running
now: REITs, individual landlords, partnerships, etc--all of them are
profitable when there is a cash flow. The moment rents stop flowing under a
certain limit, deleveraging starts. That's what happening in this market.

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hash872
What are you advocating for here- an end to mortgages? Buildings are extremely
expensive, and most purchasers need bank financing in order to buy one. They
typically have a certain amount of skin in the game because lenders require
them to put x percent down, I doubt they're 'highly levered'. They're normally
levered- that's how the real estate business works.

If you get rid of leverage entirely, the only people who'll be able to buy
real estate will be the enormously wealthy who can pay cash. If you're
concerned about inequality, I think that this would be a much worse
situation....

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raincom
Low interest rate is the major factor in the inflation of real estate, thereby
increasing the inequality. Bump up interest rates, and reduce the risk taking.

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jonmartinwest
And criminals using real estate for money laundering.

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dahdum
Government should take a hit, in my opinion. It's inefficient for every
individual and entity to prepare themselves against things like this,
especially since government action (stay at home orders) is exacerbating it.
The business "bailouts", at least the in US, are mostly just loans anyway.
Taking a "too bad" stance and letting businesses cascade fail prolongs the
pain and leaves the country worse off when the crisis is over.

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FartyMcFarter
> Government should take a hit, in my opinion.

Government means "everyone who pays taxes".

I'm not sure that's fair. I think it's fine to spend taxes rescuing _people_
(including the business owners if they're in personal trouble), but rescuing
businesses feels like a very different story.

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dahdum
If you don't rescue businesses, you end up needing to rescue a lot more
people. You can also give loans (not tax dollars) to rescue business. People
require grants.

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londons_explore
"loans" given to businesses often turn into grants when the principal is
written off in a few years time after the public spotlight has passed.

Sometimes government even announces that they intend to do that at fancy
private dinners with a wink and a nudge...

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JonoW
Whilst I'm sure landlords are in a tight spot too, what good actually comes
from evicting any business right now? It's not like there are any new ones to
take their place. Having an existing business with known revenue, waiting to
restart once lock down ends seems better than hoping a new one will fare any
better.

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rebuilder
The landlords can probably keep the tenants' deposits if they get evicted or
leave before their term is up. This can mean access to quite a bit of money
rather quickly. And some tenants will have fixed-term leases with the contract
expiring in a few months' time - for the landlord, forcing those tenants out
of the contract before that term is up can be a win, because of the deposits.

Also, I don't think most businesses are literally out of cash yet. They're
simply prioritizing other expenses, like wages. Landlords stand to benefit by
forcing some of that money to go towards rent.

From a business perspective, it would be strange if the landlords did _not_
try to get paid.

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Ididntdothis
I only hope that this won't lead to a situation where people and organizations
with deep pockets will take over even more of the housing stock like they did
in 2008.

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ethanbond
Yep, that’s exactly what will happen.

One crisis closer to having a single mega landlord (or a very small class of
landlords) who can charge whatever they want for your right to exist on the
face of the planet.

It is time to undo this with the LVT like what Singapore does (almost all land
is owned by the state and leased out on 99yr leases). The net effect is that
the market sets rent prices, but the revenues not due to the landlord’s
actions (I.e. revenues due to nearby employment opportunities, education, or
public infrastructure) go back to the state and get reinvested in the
community.

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ryandrake
I think Warren Buffet said "only when the tide goes out do you discover who
has been swimming naked". What I can't get over is that we just found out
basically everyone is swimming naked.

Businesses lose cash flow for one month and they can't pay workers. Workers
miss one paycheck and they can't make rent. Landlords miss one rent payment
and can't pay their mortgage. Banks start seeing mortgage defaults and
immediately need a bailout. Everyone's broke! It's broke all the way down. If
any one of those in that chain kept a little emergency fund, we wouldn't be in
this situation. How did we all manage to build an economy such that we're all
paying each other just-in-time to avoid catastrophe?

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pgsbathhouse2
> How did we all manage to build an economy such that we're all paying each
> other just-in-time to avoid catastrophe?

Stagnate wages. And instead of raising wages, we lowered interest rates to
keep the money flowing going.

As we have just discovered, an entire segment of society is being propped up
by the borrowing power of the "middle class" in America.

We have been pulling the wrong levers, and as you've said in not so many
words, our current economy is a farce. People are being fed the scraps of the
economic pie.

We should give the people their money; their due, proper wages. We should stop
formulating economic policies on "the rich should get richer no matter what."
It might not be too late to return to sound economic policies that benefit the
populace and not a select few, and in return we'd have a more robust economy.

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Animats
Much of brick and mortar retail is just going to be unnecessary after this.
Once everyone has online ordering set up, there will be a lot less demand.
Really, who _wants_ to go to Safeway? Buy AMZN? Maybe.

Same for office space. Work from home will be the new normal for people who
work in offices. People who go to work in person will do something other than
use a keyboard and screen. I've been wondering for some time when we'd hit
"peak office". It just happened.

It's going to be a year or two before bars, restaurants, nightclubs, and
sports get back to normal. Not until there's a vaccine and almost everyone has
had it.[1] Or, the hard way, repeated smaller waves of epidemics until about
60% of the population has had it and the disease dies out for lack of new
victims. After lockdown, we're still stuck with "social distancing" for many
months.

Life will go on fine. There are going to be screams from commercial real
estate owners. You want to see entitlement? Talk to a landlord. Manufacturing
will be fine. Services will do great. Office space and retail space will hurt.
That's OK. We survived the death of malls.

[1] [https://www.sfchronicle.com/health/article/What-Bay-Area-
res...](https://www.sfchronicle.com/health/article/What-Bay-Area-residents-
can-expect-after-15179657.php)

~~~
Animats
Other businesses on the way out:

\- Major League Baseball. The average age of a baseball viewer is 57, up from
52 in 2006. Just 7% of baseball’s audience is below age 18. The 2020 summer
season will almost certainly be cancelled due to the epidemic. The 2021 season
may be cancelled due to lack of interest. Once people get out of the habit,
it's hard to get interest going again. Horse racing aged out that way. Who
goes to a horse track any more?

\- It's going to be amusing if NFL football gets replaced this fall by Madden
NFL 20. Could happen. Simulated football, played by the real coaches, with
Pixar-quality rendering, on national TV? Basketball, with smaller teams, might
carry on; everyone gets tested before the game, and there's no audience.
"Audience insertion" in video coverage of sports could become a thing. It's
often been done in movies, after all.

\- Boeing? Will any 737 Max ever need to fly again? People willbe moving
around less in large vehicles for several years.

\- Cruise lines? Forget it for a few years.

On the way up:

\- Biodefense, of course. Nobody ever shut down the whole world before. This
was an accident. Somebody might do it on purpose. It's too easy to scale. That
DARPA program to generate antibodies for a new virus will be a big deal.
Vaccine R&D and manufacturing will be way up, with plenty of funding from many
governments. Watch the anti-terrorism lobby pivot to biodefense.

\- Anything associated with working from home, of course.

\- Delivery. But expect the "gig economy" to be made more like regular
employment. Expect the quality of delivery to improve. The delivery industry
needs to keep the cold stuff cold and the hot stuff hot. Only Safeway and
pizza delivery try to do that now.

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rasz
Obviously thats what business interruption insurance is for
[https://www.youtube.com/watch?v=xLJ4_CPlCr4](https://www.youtube.com/watch?v=xLJ4_CPlCr4)

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danharaj
Over the past 40 years the West has fallen into a deep capitalist realism
which completely erases the contingent nature of our economic system. Debt and
property are not basic facts of reality, they require stable, predictable
economic relations. Those are all out the window right now.

It may be ideologically impossible for our governments, rentiers and financial
institutions to acknowledge that the suspension of daily life means the
suspension of business as usual.

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Ididntdothis
I think it would make sense that if businesses are told to close then to tell
the landlords that rent payments will also stop. It seems pretty fair. Same
for people whole have lost their job. You could also suspend rent payments for
them. This may cause pain to the landlords but it seems fair to share the
pain.

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onetimemanytime
close the courts. Granted is their rent but this is an act of god

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boznz
Any form of profiteering in a crisis such as this should result in massive
fines and prison time, in war time I believe firing squads were in order.

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zraako
Not usually a fan but starting to understand why Mao went so salty on
landlords now

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paulie_a
Moa probably has a lot of fans, left. He killed the rest. 9-10x of Hitler.

