COMMERCIAL
Tenant Power
Disgruntled retailers are ganging up and
pressuring landlords to reduce service charges.
Matthew Williamson outlines the legal position
and possible defences for the landlord
he news that Westfield, the to which these have been adopted is
T
•
Repairing obligations: tenants are now
shopping centre owner, has questionable. It appears tenants, driven on are insisting on more reasonable
managed to cut the service by financial pressures, are more willing to repairing obligations. Generally a tenant
charge at its prestigious new take up issues with their landlords. The should not sign up to renewal or
development at Shepherd’s case of Boots UK Ltd v Trafford Centre Ltd rebuilding covenants and should only
Bush following a campaign last year is a good example of tenants commit to more onerous repairing
from unhappy retailers has been seen as a challenging the ability of a landlord to obligations if warranties or guarantees
minor victory for retailers unhappy at charge for items, in that case promotion, are available. Landlords should not
paying what was perceived as being over which they see as being outside what the expect, although some still do, a tenant in
the odds for their service charges. landlord can properly charge for. a secondhand space to sign up for a full
The action taken at Westfield is a It must be remembered that in repairing lease unless of course any
tangible example of what retailers can do, commercial premises, the contract is still potential dilapidations claim is rentalised
especially in the current market, if a ‘sacred’ and should a dispute ever get that or there is some other concession made
concerted effort is made by all the far, a court would look at the bargain and for the state of the premises.
occupiers to make a landlord bow to the terms of a lease between the parties to
commercial pressures. It may be that the govern their relationship. It may take a lot
•
Break clauses: these give the tenant
action by the tenants at Westfield was for a court to infer anything else. The greater fl exibility but leave the landlord
borne purely out of the present economic Westfield case has shown that landlords do with an uncertainty over it being income
climate, but are tenants able to rely on the respond to commercial pressures imposed stream. This again can be incentivised by
provisions of their leases to force their by the tenants. The difficulties come when rent free periods if tenants do not
landlords into obtaining best value for the interpreting what is already in a lease and exercise breaks, or by penalties if they do.
services they are obliged to provide? trying to unravel or amend an agreement
The argument isn’t new. The classic which has already been struck. Below are
•
Assignment: this is a diffi cult
example is the ground floor tenant who some pointers for tenants who are looking balancing act for the landlord. They want
states, “I don’t use the lift so why should I at what they already have, and what they to exercise reasonable control over the
pay for it.” Contract being king in the may be able to negotiate: assignment of the lease, however, if the
context of purely commercial properties, assignment provisions are too onerous
landlords have historically had to make the
•
Rent: will the landlord accept rent this affects the ability to assign and thus
drafting of their leases broad and in some payable monthly in advance? Would this the value of the lease.
cases, ambiguous in order to claim for assist cash fl ow?
everything they want to, using sweeper
clauses should a tenant expose a gap in
•
•
Sub-lettings: a tenant will want the
Rent reviews: there is some merit ability to sub-let at the market rent not
what the landlord can charge for. towards moving towards fi xed uplifts and the passing rent and be able to offer
Case law has chipped away at the ability treating the lease more like a bond rather terms outside the lease. This ensures
of landlords to charge what they like by than a traditional market reviewed rent. surplus accommodation can be sub-let
way of service charge during the term of We may even see the introduction of and at the moment tenants are looking at
a lease. These cases have made landlords downward reviews. the property that they own with a view to
think more carefully about not only the
drafting of their leases but also the
methodology of calculating the amounts The action taken at Westfield is a
charged to tenants which sit behind them.
Further advances have been made with tangible example of what retailers
the British Property Foundation’s Code for
Leasing Business Premises and the RICS can do, if a concerted effort is made
2006 Code of Practice on Service Charge in
Commercial Premises although the extent by all the occupiers.’
72 JULY-AUGUST 2009 PROPERTYdrum
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76