I have just read the September Commercial Development Activity for September 2010 and, that coupled with comments made by one of my golfing partners at the weekend to the effect that there are more redundancies coming from residential developers, has deepened my pessimism.
If the market is as bad as it seems I do wonder why more tenants, when looking for commercial premises are not driving harder bargains. This is an issue that we Commercial Lawyers have gone on about for a number of years but it is worth another airing.
Commercial tenants, even quite large companies, seem to go into the market without proper protection. Some seem to accept what the letting agent tells them. The point to bear in mind is that the letting agent is not acting for the prospective tenant but is employed by the landlord to get the best delay.
Some tenants will negotiate to get a rent review but do not think of the other issues. Here are some points that also need to be considered:
1. Why are you taking on a full repairing lease particularly of an old building on a short lease? What happens if you have to meet a major expenditure? Will you ever recoup the money spent?
2. Why are you taking a lease for 21 years? Why not have greater flexibility?
3. Why is the rent review upwards only? That can mean that even if the rent is right now at review you will be paying too much rent, which means that if you want to move you will find it difficult
4. Why are you paying the landlord’s legal cost? He is lucky to have you interested; he should probably be paying you.
I could blog on for pages about this but I am sure the point is made.
So what is the solution?
The best method is that before you agree the terms discuss them with a commercial agent that you instruct, just to make sure that what you are being told is a good deal. The agent can just point you in the right direction.
You can go back and renegotiate. That is the cheapest course or you can instruct the agent to act on your behalf. The likely cost you will incur in his fees will probably be nothing to the savings you will make over the term of the lease
Last 5 posts by David Thomas
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