T e Secretary of State for Housing, Robert Jenrick, indicated that
the interventionist approach would go further when he announced, in December 2020, an intention to review the ‘outdated commercial landlord and tenant legislation, to address concerns that the current framework does not refl ect the current economic conditions’. T is change in relationship between tenants and landlords was
already happening ad hoc, with many tenants using Company Voluntary Arrangements (which fall short of insolvency and enable company directors to restructure debts) to negotiate a change in the terms of a lease, including its length and the way rent is calculated. According to fi gures published by PwC, 29 large businesses entered
a CVA in the second half of 2020, compared to just four during the same period in 2019. All these fi gures demonstrate that repeated bouts of uncertainty
create a market in which traditional, long-term, infl exible leases are no longer accepted as the de facto solution by businesses that fear they will have to respond quickly to changing and challenging events. T e shift will take some time to fi lter through, as leases come up for
renewal, or tenants and landlords enter into negotiations to maintain viable commercial relationships. But the fact that a shift is under way seems impossible to deny and seems set to permanently alter the landscape of commercial letting.
Short term leases offer benefits for landlord and tenants For the tenants and landlords alike, the advantages of a short-term lease include the fl exibility it off ers and the speed with which deals can be done. In the short term, rents may be coming down but longer term the off er of short-term leases may enable landlords to revisit lease terms once the market settles. On the downside, there is the uncertainty that the lack of guaranteed
returns may make investors and lenders less keen to give their backing to commercial property developments.
ALL THINGS BUSINESS 25
It is likely the market will adapt to the changing
landscape and in the meantime landlords and tenants will need to plan with investors and lenders to achieve the most appropriate lease terms to match their given circumstances.
If you have leases to consider, either new leases to draft, agree, amend or renew, or as part of a wider property or business purchase, sale or refi nance, then contact James Khakpour-Smith, a Partner in the Commercial Real Estate team at Taylor Walton.
James has a wealth of experience in acting for landlords, tenants and funders in matters involving leases and can be contacted on 01727 845245 or at
james.khakpour-smith@
taylorwalton.co.uk
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