Smaller retailers have been handed a lifeline by some of the property industry’s biggest landlords, which said yesterday that they would allow some to pay rent monthly rather than quarterly.

The retailers have been lobbying for the move since the summer and their arguments have intensified as the decline in consumer spending on the high street culminated this week in the collapse of Woolworths and MFI.

The agreement was reached by a group of property heads and retailers, including Sir Philip Green, the Arcadia chief, Phil Wrigley, chairman of New Look, and Francis Salway, chief executive of Land Securities.

However, the deal was struck as it emerged that two more big names had asked their landlords for help with rents. Focus, the DIY chain, and Land of Leather, the furniture retailer, have asked for rent reductions and monthly payments across their portfolio to ease cashflow.

The seven landlords that will grant monthly payments for small retailers are British Land, Land Securities, Liberty International, Legal & General, Aviva, PRUPIM and Westfield.

The concession is extended only to retailers with three shops or fewer in their shopping centres, which pay an annual rent of £50,000 or less, provided that they pay by direct debit.

Landlords have been criticised by retailers for not moving from quarterly to monthly rent – a practice that retail chiefs describe as medieval. They complain that the quarterly system disrupts cashflow and can jeopardise sound businesses.

The landlords suggested that hundreds of shops will benefit from this initiative. Other retailers are invited to approach the property owners individually to discuss monthly payments. “The initiative to accept monthly rents will have a significant benefit to retailers’ cashflows,” the landlords said.

Bill Grimsey, chief executive of Focus, said that DIY sales had fallen by 10 per cent in recent weeks. “If landlords think existing leases have to be adhered to in this climate, they have their heads in the sand,” he said.

The British Retail Consortium (BRC) said that it was supportive of the move but added that it would like to see all landlords offer retailers more favourable payment terms to ease cashflow pressures, given the fragile trading environment.

“As is evident from recent events, it is not only small retailers but well-known high street names that are struggling to cope in the current economic climate, and support from landlords is essential if they are to ride out this significant, potentially lengthy, economic storm,” a BRC spokesman said.

This month it emerged that Liberty International, Britain’s biggest shopping centre owner, had doubled its provision for tenant failures in an ominous indication of its expectations for the new year. The owner of Lakeside Shopping Centre, Essex, and MetroCentre, Gateshead, has put aside £10.2 million, up from £4.5 million last year.

A joint initiative between the property owners and retailers is also under way to lower service charge costs. The landlords believe that charges could be reduced by a fifth using this scheme.

The property and retail leaders also said that they would continue to work together to lobby the Government to reverse completely the decision to levy full rates on empty property. “This imposes further burdens on all businesses during a downturn and is seen as likely to inhibit new construction work and hence jobs,” they said in a joint statement.

The empty property rates tax was introduced on April 1 and forces businesses to pay rates on empty buildings, even if they have just been completed. It is estimated that the tax will cost the commercial property industry £2 billion this year.

There have been reports that companies have demolished buildings to gain exemption from the tax. The British Property Federation, which represents landlords, estimates that five million sq ft of commercial property has been demolished since April.

The economic downturn has increased the opposition to the tax. Last week, Nick Brown, the Government Chief Whip and Labour MP for Newcastle upon Tyne East and Wallsend, said that the tax was “destructive” and hinted that exemption for the North East could be coming.

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