The commercial property market in the UK is facing a significant number of challenges in the current climate, not least because the uncertainty created by Brexit.
Even the climate is impacting on the demand for commercial property and the real-time resale prices, with a report by the Urban Land Institute (ULI) revealing that extreme weather conditions having doubled globally since the 1980s. In total, there have been more than 800 extreme weather events per annum during the last 10 years, with flood risks rising exponentially during this time.
This can create significant challenges for landlords, who may struggle to secure a negotiate competitive and sizeable lease that reflect the value of the property in question. Here are some tips to help you on your way.
1. Achieve the Ideal Lease Length
Any lease that you agree will be covered by the Landlords and Tenants Act of 1954, which ensures that your tenants have the right to renew when the old agreement expires.
However, in instances where tenants are trying to negotiate a short-term loan, they may choose to exclude the Landlord and Tenant Act provisions, and whilst this may be tempting to landlords this increases the risk of high turnover and vacancies and could potentially cost you money over time.
With this in mind, you may be better served by trying to negotiate a long-term lease that’s covered by the Landlords and Tenants Act, but if you’d like specific advice we’d recommend liaising with established property experts such as Avison Young.
2. Consider your Rent and the Benefits of Rent Free Periods
As a commercial landlord, it’s extremely unlikely to find tenants who want to pay the advertised rental price (especially in the current climate).
By the same token, you’re unlikely to want to negotiate the basic rental price, and this can create something of an impasse that costs you both time and money.
With this in mind, you may want to consider offering alternative incentives to tenants, including breaks and rent-free periods. You could offer to delay rental payments for the first three months after the move, for example, before applying the full amount after this period of time.
This is common in the commercial property market, and from a landlord’s perspective it definitely enables you to optimise revenues over time.
3. The Issue of Repairs and Maintenance
Tenants will also expect you to provide full repairing and insuring during the terms of the lease, but landlords often negotiate agreements that place this burden on the shoulders of businesses.
With both parties usually loath to accept full responsibility for repairs and maintenance (especially when dealing with tenants who operate high-traffic businesses), it’s important to strike an amicable agreement that benefits both parties wherever possible.
A viable compromise is to include a clause that compels tenants to keep the property in no worse condition that it was when the lease was signed.
After all, this requires tenants to repair any damage that they’ve caused across the duration of the lease, while placing a cap on the service charges and costs incurred by business-owners in the process.
