The Business Exchange Bath & Somerset Issue 11: Spring 2019 | Page 31

COMMERCIAL PROPERTY Commercial property rent reviews by Jan Woodland, Head of Commercial Property, Mowbray Woodwards Commercial property lease rents have been in the news recently with the new House of Fraser owner, Mike Ashley, actively taking landlords to task over (in his opinion) perceived exorbitant or unrealistic rents for some of the House of Fraser stores around the country. He is seeking agreement for rent reductions and if this cannot be achieved, he has threatened to close the store leaving the landlord either to forfeit (if the rents are not paid) or agree to take a surrender of the leases – in both cases the obligation to pay the rent ceases. In some instances, landlords have agreed to revise the rents downwards and keep House of Fraser as tenant. It is usually the case, however, that if a rent is agreed between two consenting parties then there is no obligation on the landlord to review it other than in accordance with and at the times set out in the lease and if the tenant can’t pay or won’t pay then the landlord will use whatever remedies it has to pursue unpaid rents and or recover possession of the premises. For many landlords and tenants, rents and rent review can be a thorny issue. On one hand, landlords will be looking to maximise their rental income and increase their yield. On the other, tenants will want to minimise their liability, if they can. This means that effective negotiation and representation before the lease is finalised and also at rent review time is vital. So, if you are negotiating the terms of a new lease or embarking on a rent review with your landlord, it is important to be fully aware of the rent review provisions in your commercial lease. Obtaining legal advice from a commercial property solicitor will ensure the rent review provision is fair and reasonable and that you don’t end up paying too much. How is rent calculated? There are several types of rent reviews. These include: open market; index linked; stepped increases; turnover and hybrids. The most common types of review are open market rent reviews or index linked rent reviews. In open market arrangements (which tend to be used on longer leases), rent reviews take into account the rents being charged on similar properties in the same or similar areas and reflect the best rate the property could achieve. Open market reviews therefore tend to reflect the state of the economy and (in theory) the fortunes of local businesses. With index linked reviews, any rent increases are linked to increases in the Retail Price Index or Consumer Prices Index. Most commercial leases include an ‘upward only’ provision, meaning that even if rental values are lower, the rent cannot decrease. Getting advice from a specialist commercial property solicitor can help you get a fair, competitive rental rate. A solicitor with extensive knowledge of commercial lease agreements, landlord and tenant issues, case law, rent review negotiations and dispute resolutions will ensure you enter rent review negotiations on an equal footing with your landlord. If you have a rent review coming up or are considering moving premises, speak to a specialist commercial property solicitor to ensure the best deal for you now, and in the future. Why is it important to get advice from a solicitor? [email protected] 01225 485700 When you take on a commercial lease, one of the most complex and intimidating parts of the lease can be the rent review provisions. For more info: www.mowbraywoodwards.co.uk with the council and its team to bring about these historic changes at the centre of Bath.” Bath Quays South is part of a wider business district for Bath, the biggest office- led development ever undertaken in the city, spanning the north and south banks of the River Avon. The scheme has been part-funded by the West of England Local Enterprise Partnership through the Local Growth Fund, administered by the West of England Combined Authority. Councillor Tim Warren, leader of Bath & North East Somerset Council, added: “Bath is a very desirable place to live, work in and to visit and we want to build on the city’s reputation as a centre for innovation by providing quality workspace that cutting-edge businesses need. An increase in the number of high value businesses in the city will result in higher wage jobs and improved opportunities for residents.” FIRST NEW OFFICE BUILDING FOR BATH IN 25 YEARS A new project has been approved and work is set to start this spring on a new office building in Bath. This is the first office building in over 25 years to be given approval. BAM construction has already started preparation work on the Bath Quays South site, where a new 45,000 sq ft office building will be created as part of a project expected to bring thousands of skilled jobs to Bath. After years of complaints from property see an influx of businesses from within and outside the region wanting to take advantage of this fantastic new space and Bath’s quality of life that few places can match.” The new building, which is due to open in 2021, will provide Grade A office “This is just what the city needs. The supply of quality offices in the centre of Bath has declined significantly yet demand continues to grow” agents that office space is too difficult to find in the city, the development has been welcomed. Andy Smith, from Knight Frank, which is marketing the new offices space, said: “This is just what the city needs. The supply of quality offices in the centre of Bath has declined significantly yet demand continues to grow from both Bath-based businesses looking to expand and from companies looking to relocate to Bath. We fully expect to accommodation over five open-plan floors, with basement parking, cycle storage, showers and lockers. Floors can be subdivided if required. Neil Dorrington, construction director for BAM, said: “It is a fascinating development, which requires our specialist design skills as well as our pedigree in making complex construction happen. As always, the key to success is how you work with your partners and we are delighted to be working closely THE BUSINESS EXCHANGE 2019 31