{"id":2105539,"date":"2022-11-02T14:54:55","date_gmt":"2022-11-02T14:54:55","guid":{"rendered":"https:\/\/www.thebusinessdesk.com\/northwest\/?p=2105539"},"modified":"2022-12-14T09:35:26","modified_gmt":"2022-12-14T09:35:26","slug":"cost-of-living-the-impact-on-real-estate","status":"publish","type":"post","link":"https:\/\/www.thebusinessdesk.com\/northwest\/news\/2105539-cost-of-living-the-impact-on-real-estate","title":{"rendered":"Cost of living – the impact on real estate"},"content":{"rendered":"

In the first of a series of articles looking at how mid-market firms can navigate their way through the cost-of-living crisis, Holly Hill, senior associate in the real estate team at Mills & Reeve, looks at the impact on commercial tenants.<\/strong><\/em><\/p>\n

With soaring energy bills and rapidly rising interest rates, companies may once again find themselves struggling to pay their rent.<\/p>\n

The current dilemma is nothing new. Enforced closures and resulting lack of trade during the pandemic left many commercial tenants unable to meet their rental obligations.<\/p>\n

Back then the government hastily stepped in with emergency legislation which placed a moratorium on the usual actions available to landlords against non-paying tenants.<\/p>\n

Landlords were unable to bring commercial debt claims, exercise CRAR (taking control of a tenant\u2019s goods to sell at auction), forfeit leases, or present winding up petitions in respect of rent arrears which accrued during the pandemic.<\/p>\n

Further legislation introduced a binding arbitration process to which landlords and tenants could refer Covid rent debts, in the absence of agreement between them as to how much the tenant should pay.<\/p>\n

The guiding principle behind the scheme was to ensure that businesses who would be financially viable, but for their rent debts, were able to survive.<\/p>\n

Now with companies facing huge hikes in costs, will the government introduce further legislation to protect commercial tenants against forfeiture, civil claims, CRAR and insolvency proceedings?<\/p>\n

Unfortunately, the answer is most likely not. However, there several steps commercial tenants can take to help weather the storm of the cost-of-living crisis.<\/p>\n

At the end of the fixed term of their lease the tenant may benefit from requesting a renewal lease, especially where market rents have dropped.<\/p>\n

Unless the lease is contracted out of statutory protection, the tenant will be entitled to a new lease, on the same terms as its existing lease, but at the current market rent.<\/p>\n

The market rent can be agreed between the landlord and tenant or, in default of agreement, set by the court.<\/p>\n

In addition to determining the market rent, the court has the power to include provisions in the lease for varying the rent; as well as the discretion, considering what is fair and reasonable, to impose further lease renewal terms having regard to the terms of the current tenancy and \u201cto all relevant circumstances\u201d.<\/p>\n

The courts may consider that there are sufficient circumstances to impose more flexible lease terms such as shorter lease terms, frequent\/rolling tenant breaks, upwards or downwards rent review and\/or turnover rents.<\/p>\n

The commercial property market is becoming increasingly more accepting of flexible lease terms. In a bid to attract tenants, landlords may be willing to accept such terms at the outset of a lease, or without recourse to court for renewal leases.<\/p>\n

For tenants in the middle of the term of their leases struggling to pay rent, it could be worth approaching the landlord to establish whether it will agree a rent concession which can be documented in a simple side letter.<\/p>\n

Landlords may be willing to agree rent concessions to keep a tenant in occupation paying some rent, rather than forfeiting the lease or forcing the tenant into insolvency and ending up with an empty premises.<\/p>\n","protected":false},"excerpt":{"rendered":"

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