There have been some dark days on the high street. It’s not just the tenants who feel the struggle of having to stump up increasing business rates, less footfall, and having to compete in an online environment. Commercial landlords tend to bear the brunt of all these issues and being left with an empty viable property can be painful.
This uncertain uneconomic climate, borne from different factors, including Brexit, has concerned commercial landlords for a considerable time. Figures from CoStar disclosed that in summer 2019 investment in the commercial sector had fallen by a third. The rocky nature of the market in December 2019 saw £57m withdrawn from UK property funds.
This market makes it difficult for commercial landlords to sell their asset when it’s left vacant. Additionally, the management of the building becomes an issue at that point, which can be costly. So how can this scenario be prevented? It may be wise to keep a property occupied during uncertain times, so how can commercial landlords retain their commercial tenants and mitigate any economic issues?
Retaining a tenant:
Don’t be stubborn but do play your cards correctly. When a company is going through financial difficulties or facing insolvency, it may attempt to enter into a company voluntary arrangement (CVA) so that it can continue operating under restructured operating costs. CVAs can be an inconvenience for landlords as they allow companies to change such obligations as rent, payment terms, and duration. Sometimes, these do not require a landlord’s consent. So, what can a landlord do to protect their income and retain their tenant?
Firstly, landlords need to be aware of the potential CVA clauses that are likely to affect them and their business. CVAs can contain a plethora of clauses that are onerous to the landlord; including releasing the tenant from dilapidation obligations, the outright closing of premises, reducing the rent payable under the lease, preventing the landlord from being able to forfeit the lease, and restricting the right of the landlord to terminate under the lease.