Tenants are Calling the Shots

In times of economic uncertainty, there will always be winners and losers, but it is with an element of surprise that Lucy Jones, a commercial property specialist in the Commercial Team at Eric Robinson Solicitors, has seen Hampshire businesses quickly realise their upper hand as tenants and strike impressive deals as a result. Could this be the end of the reign of the landlord?

It cannot have escaped anyone’s notice that the last few months have seen a dramatic shift in supply and demand when it comes to property, but I have seen first hand that businesses in Hampshire are becoming increasingly confident when discussing the renewal of tenancy agreements for their premises.

At a time when companies are reluctant to commit to new financial and legal obligations, tenants are maximising the one position of strength an economic downturn provides and bargaining for the most favourable lease terms in many years.

I have been in a position to negotiate ‘Break Options’ on behalf of my clients which have the security of a longer lease, but give the added reassurance of a ‘get out clause’ so the tenancy can be ended sooner without cost if there are problems. For example, one of my clients took on a lease of premises for six years, knowing that its most lucrative contract with a customer is due to expire in three years. With the possibility that it will not be renewed, then it was prudent to negotiate a break clause to take effect at the expiry of the third year of the term.

I have also found in these uncertain times that landlords are so keen to secure a tenant for their premises, they are agreeing to leases with less frequent rent reviews and where rental income may not even start to come through for a good few months. They are obviously more willing to offer these incentives if tenants show that they are serious, committed and are of good financial standing, but is a very interesting to see how the agenda has changed.

Tenants occupying business premises on an informal basis are coming under increasing pressure from landlords to commit to legally binding leases because this will add value to freehold interest in the property and guarantee income. Tenants in return are demanding clauses such as costs to be paid if they are forced to move and repair and maintenance work be carried out to the property before signing.

When times get tough, there are always deals to be done and it is my role as a solicitor to instigate and manage these negotiations in the best interests of my clients, but there is no doubt in my mind that the tide has turned and landlords in our region are having to fight for business just as hard as their clients.

For more information on this or any other matter of commercial law, call Lucy on 023 8022 6891 or email lucy.jones@ericrobinson.co.uk