The move by John Lewis follows challenging developments for a number of national retailers. CVAs have, unquestionably, reflected difficulties facing a host of high-street stores, and in turn, landlords in the sector.
John Lewis, in seeking a 20% discount in service charges this quarter at a number of its stores, hopes to reduce its costs across its portfolio. The news comes days after it announced a significant restructuring of management roles across its department store and supermarket business.
The concern for landlords in the case of service charge, as opposed to negotiated reductions in rent, is that there could be a significant shortfall between the sums actually spent in managing shopping centres, and the amounts that can be properly recovered from tenants.
It is not the first time national retailers have sought to stray from their contractual obligations, even outside the context of the numerous CVAs seen recently. For instance, earlier this year Holland & Barrett announced unilaterally that it would be paying rent under existing leases on a monthly basis, rather than the quarterly payments it had covenanted to make.
While John Lewis will hope landlords will reluctantly agree to negotiate the level of service charges (on the basis that John Lewis is a key anchor tenant on high streets and in shopping centres), failure to pay service charge in full under the relevant leases will allow landlords to take legal action for its recovery.
It will be of particular interest to see how robustly landlords respond, with concern that other national retailers may take a similar stance.
John Lewis is under contract to meet its service charge obligations and withholding a big chunk of it could put it in direct conflict with some of its property owners.