| Press release
14 September 2008
Talk To Your Tenant
In 1990 John Major was promoted from his position as Chancellor of the Exchequer to Prime Minister. It was the first change of leader for 10 years. Unfortunately it was not a good year for him, the property boom ground to a halt and prices slid rapidly, inflation jumped to an 8 year high and the economy entered a recession. Sound familiar?
There are of course a number of significant differences between the events of then and now but what is clear is that businesses are, in the main experiencing a downturn in profits, unfortunately when this happens, if history is anything to go by, the commercial landlord needs to be on guard as tenants may start to default on rent payments.
When faced with a defaulting tenant a frequent reaction is to forfeit the lease. If you are lucky and the tenant has already left the premises, you can simply go in and obtain possession by peaceable re-entry. If there is any sign of continued occupation it is safer to proceed to forfeit by serving court proceedings. The latter is of course longer and more expensive. Obviously no matter which action you take the tenant can apply for relief from forfeiture.
However it is once forfeiture has been affected that the practical problems arise. Firstly you are left with rent arrears for which, normally, there is little prospect of payment as they are no longer able to trade.
Probably more importantly however, you are left with a property for which you are now liable to pay the full business rates so it needs to be let quickly to cut those losses. However the likelihood is that the market will be very much a “buyers” one. That means that the concessions you will need to make on the terms of the new lease will not be to your long term advantage particularly in respect of rental sums and break clauses.
So is there a better way forward? The answer is - possibly. It is very simple but frequently overlooked. Talk to the tenant!
Discuss their difficulties with them. It may be that they simply needs a “rent holiday” for a month or two to get their cashflow back on track. You could always agree to a plan for payment of those missed rents when the “blip” has passed.
If the problem seems to be longer term but the business is still salvageable, it is open to you to agree a reduction for a longer period, either with or without a subsequent increase in rentals to cover the loss. This way, at least you are getting some income and preserving what is likely to be a lease that is beneficial to you.
Of course there will be occasions where forfeiture is the way forward but, unless you have a tenant in the wings agreeing to your terms, it should not be the only one.
For more information please contact Spencer Glazsher on 01752 764848 or spencer.glazsher@brightllp.co.uk
ENDS
Notes to editor
Photo of Spencer Glazsher attached.
For more information visit www.brightllp.co.uk or contact Martyn King at Fuel Communications on 07815 322304 or martyn@fuel-communications.co.uk
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