Harris Lamb Blog – 3rd march

 


 

Richard Fantham

3rd March, 2010.

Spotting opportunities for clients to improve lease terms in the current market

By Richard Fantham, Professional Services Department

Now lets be honest, the question you are all asking is “What is keeping Landlord and Tenant Surveyors busy in the present market”?

Whilst historically this work has revolved around rent reviews and lease renewals, we have seen increasing work in the lease re-gear field of late. So what does a lease re-gear entail?

A landlord will invariably be looking to improve lease terms by way of the extension of the existing lease or, possibly, the removal of a break clause, and may offer a deal to the tenant in return for achieving this.

Similarly, for tenants who are committed to a building for the long term, there is presently the opportunity to agree a deal with a landlord (which may include an incentivised rent or rent free) in return for extending its lease or removing a break clause.

“So what’s the attraction at the moment to both parties?” I hear you ask.  Well, for the landlord, preservation of income and increasing the length of leases (or removing break clauses) is attractive in the current climate and may well assist with re-financing or balancing the expiry dates in a portfolio if more than one property is owned.

For the tenant, we are currently seeing deals whereby short term rental concessions can be achieved in return for a longer term commitment of the building.

If, for example, the tenant has expended considerable amounts of money fitting out the property or is certain that the property will suit its business needs for the foreseeable future, this is an opportunity to talk to the landlord and possibly achieve some financial reward for increasing its commitment.

There are very few deals at the moment where both parties can be seen to gain something from the transaction, but a lease re-gear where both parties achieves some benefit is well worthy of consideration and is increasingly keeping us busy at the current time.

Remember, this is a window of opportunity for deals that could benefit both the landlord and the tenant. Isn’t that a rare event?!


 

If you would like to contact Richard to discuss any issues raised in his blog, please call Harris Lamb’s Birmingham office on 0121 455 9455, and ask to speak with him. Alternatively, email richard.fantham@harrislamb.com.