Guest Spot –Martin Powell, Withy King Solicitors
Securing tenants in an uncertain economic climate
Martin Powell, Partner, Withy King
In recession, empty premises can be a problem not just for landlords, but tenants also. New business ideas and start ups are critical to improving the economic environment, but whilst landlords may have empty premises, tenants may be concerned at substantial long term commitments.
Some landlords can afford to hold out on rental levels and lease terms. However, with options open to them, tenants could look elsewhere.
To help secure a tenant, it makes sense to work together and agree terms without wasting time and money on legal arguments. A short understandable lease can be the answer for both parties to ensure the landlord obtains a regular income and the tenant keeps flexibility for the future.
Withy King has developed an IT capability to deliver a lease that does just that. The key issues to focus on to help keep the lease short and sweet are:
the tenant is likely to ask for a rent free period to fit out the premises and get the business started. This is negotiable along with the rent and the term. The sooner the premises are let the better as anything that helps the tenant get off to a good start must be beneficial for the landlord;
if the landlord is happy to let for a short term of up to five years, it will avoid the need to think about a tenant’s break clause, rent review and, in most
cases, stamp duty land tax;
the tenant is much more likely to go ahead if repairs are limited to the interior, not the structure of the premises and that the extent of that liability is to leave the premises in no worse condition than they are in at the start of the lease;
if the tenant is a limited company should the directors be expected to give personal guarantees to the landlord to pay the rent?;
how much flexibility should the landlord allow the tenant on transferring the lease to someone else – if they outgrow the premises or the business does not work out for them?;
the tenant has the right to renew the lease at the end of the term, provided the rent has been paid and the landlord does not want to re-develop or use the premises himself. If the tenant is only signed up to a short lease, he should expect to waive the right to renew. Flexibility for the tenant, but also the Landlord and when the market turns.
With small business empty property rates relief only being available from 1 April 2011 for premises with a rateable value of £2,600 or less, the need to let empty premises will become increasingly important. In order to avoid paying business rates, some landlords and tenants will look to let or sub-let their premises on a short term basis in order to reduce their expenses. Our new streamlined lease system will enable landlords and tenants to lease their empty premises in a timely and cost effective manner.
For more information on this or any other Commercial Property matter please contact Martin Powell, Partner at Withy King Solicitors, on 01225 352731 or email
martin.powell@withyking.co.uk.
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