A new lease of life: businesses would surely achieve better terms if they knew how
An interesting article in a recent issue of Estates Gazette, by John Forbes QC and Vivien King discusses how commercial lease terms could be improved and clarified. As the vast majority of lease terms are burdens on the tenant, it follows that such improvement and clarification would have the effect of making the lease more realistic and even fairer to the tenant.
A select number of experienced real estate solicitors and support lawyers considered and discussed why lease terms are not evolving and becoming more explicit.
The rather sad summary of the problem [for business] is and I quote “… a landlord … is usually resistant to changes …” and “The client [the business which is about to become a tenant] wants a lease at an agreed rent to be drafted and agreed as soon and as cheaply as possible and apparently is not much concerned about trying to change and improve current practice”.
The article concludes with the massive understatement that this “is arguably not in the long term interest of the property industry.” It doesn’t mention that it is certainly not in the long or short term interest of business occupiers.
For a business to rebalance the landlord and tenant relationship and make the best advantage of its strengths, it needs to understand:
- Businesses are the critical ingredient in the success of landlord’s investment model, without which that model fails. As such, the business has a strength of negotiating position, which will bring significant value and reward if properly exploited.
- There are many complex elements to consider, which make up “the right premises” for the business. A well thought through business plan is a good starting point.
- How the lease permits that business to occupy, can significantly affect the success of the business. The scope for negotiation on a ‘give and take’ basis to obtain the key terms identified in the business plan, will yield valuable results, short and long term.
Commercial property is not on the daily agenda for business owners, unless you are a landlord. This mismatch of familiarity and breadth of knowledge can lead to unequal outcomes for the business but it doesn’t have to be that way.
