Commercial Property Landlords, Investors and Developers

Lease Renewal

A tenant’s right to a new Lease can lead to delay. Opposing a Lease Renewal is not straightforward.

The Landlord & Tenant Act 1954 gives tenants rights to renew business tenancies. There are many difficult areas such as:

• Is the tenant trading from the property?
• Does the tenant occupy all of the property?

Assuming the tenant has rights to renew, notices must be served. Often disputes can arise if notices have been served incorrectly or out of time. In addition to notices, unless the parties agree extensions of time (which must be documented correctly), a tenant needs to issue a claim in Court. This can increase costs and complexity.

What if the terms of the new lease are not agreed? Common issues include the length of any new lease, whether the tenant is entitled a break option and, the amount of rent. Having clear advice about these important areas can help speed up the process and cut costs. Efficient dealings with directions/timetables can make sure that unreasonable delay is avoided and the best terms are achieved

Repairs and Dilapidations

This might be during the term of the lease or afterwards. How can a landlord protect its investment?
Repairs and dilapidations are common issues for all landlords. Ensuring that regular repairs are carried out to avoid long-term damage is essential. Most tenants have repairing obligations (either internal only or full) meaning that breaches often occur where tenants fail to repair.

We assist landlords in taking action during a lease term so as to enforce the tenant’s duty to carry out works, or, if necessary, to enable landlords to intervene and carry out works at the tenant’s expense and to recover costs provided the correct process is followed.

We are very experienced in dealing with terminal dilapidations – a claim for the cost of carrying out works incurred because the tenant has left the property in disrepair. Initial steps and advice from a good building surveyor will assist and we can help with legal problems and stalled negotiations. In a worst case scenario, we deal with Court proceedings including multi-million pound disrepair claims.

Other disputes can be associated with repairs and dilapidations such as the reinstatement of alterations or compliance with break clause requirements. Another issue for landlords might be how major refurbishment or improvements can be carried out without breaching the tenants’ rights to occupy the property.

Redevelopment

Tenant strategy is all-important in any redevelopment scenario
Obtaining planning consent, funding, lining-up new tenants – all of these steps are difficult enough, but the issue of considering current tenancies is often left too late or not given sufficient importance.

The Landlord & Tenant Act 1954 gives landlords the ability to oppose a tenant’s application for lease renewal in certain circumstances such as redevelopment or where major works vacant possession.

The process needs to be understood and started in good time as well as strictly adhered to. How far advanced does the development process need to be in order for a landlord to serve a valid notice? How early should the landlord commence negotiations with the tenant? How can a landlord initiate an early Court application and expedite any claim so as to achieve a certainty?

We are used to assisting with all of these issues including related matters such as statutory compensation, failure to deliver up possession, dealing with interim/flexible occupation and also other commercial situations such as negotiating with multiple tenants. Planning matters and other redevelopment dispute areas such as party wall legislation, nuisance, over sailing and rights to light also need prioritising and early consideration.

Rent Arrears

We understand that your business is driven by rental income.

Identifying early signs of tenant default can be key. Timely action to pursue arrears can avoid difficult long-term problems. Many landlords will consider commercial solutions, to a degree, providing there is certainty. We can help document and enforce commercial solutions or deal with worse case scenarios.

We are experienced in advising landlords regarding a range of tenant arrears strategy. Solicitor’s letters before action can be effective followed other options, such as a Statutory Demands to encourage payment, court proceedings or even forfeiture. There are other avenues, such as considering rent deposits, guarantors, sub-tenants and even re-gearing the lease or negotiating new terms which give some advantage to the landlord.

Many other complicated issues can arise from rent arrears such as insolvency, dealing with insolvency practitioners, Administrators or Receivers and understanding the statutory process of insolvency including the statutory moratorium preventing forfeiture and the landlord’s right to receive rent in such circumstances.

Enforcing Covenants

enant’s non-compliance with lease terms can be a serious issue for landlords

Unauthorised assignment/parting with possession, alterations without consent or a use which is not permitted; these are all serious problems for a landlord. Acting quickly and knowing how to take enforcement action is key. Such breaches can be waived inadvertently and taking action after delay might not be possible.

It is important to understand the process including the correct use of statutory notices, to establish the identity of occupiers in the premises for example. Appropriate notices to trigger rights under the lease need to be taken and we can assist with “twin track” without prejudice negotiations in order to reach a commercial solution such as providing retrospective consent with appropriate conditions and subject to the payment of costs where appropriate.

Each example of potential tenant’s breaches may have complications. How to deal with an unauthorised occupier? What if the unauthorised user is partially compliant? There are other difficult tenant’s breach areas such as health and safety, nuisance and trading outside the demise. We are experienced in assisting landlords in these difficult situations, but always bearing in mind a preference for commercial solutions with litigation as a last resort.

Service Charges

Many think service charges should be straightforward. It is surprising how many disputes arise in this area. Many service charge disputes can be avoided if rights and obligations are understood properly.

Commercial leases often have wide-ranging powers and duties on landlords to repair. What services are the landlord obliged to provide? What if the landlord’s services go beyond a landlord’s rights and are challenged by the tenant? Often difficulties arise where there is repair/replacement/renewal at the end of a lease. Can this be charged as service charge? What about updating/improving including dealing with new statutory requirements or even refurbishing the building? All of these are obvious potential areas for dispute and can be avoided if advice is taken.

Another problem area is where buildings are let in poor condition. Are tenants required to pay for improvements and repairs or to remedy inherent defects? Often leases have a schedule of condition, limiting the duties of a landlord or tenant, but careful thought needs to be given as to how the parties will deal with repair in this event.

Service charge arrears are a common issue, as is what evidence a landlord needs to provide to substantiate expenditure and also how a landlord can carry out repairs if there are service charge arrears in the first place.

Rent Review

We recognise rent reviews have significant impact on value

Many consider rent reviews as being the domain of surveyors and valuers – and rightly so. However, this area of valuation, mixed with assumptions and case law, is a complex and critical discipline. In addition, the whole process of rent review, notices, tactics, arbitration or determination by independent expert can be a minefield for the inexperienced. As a senior chartered surveyor and experienced solicitor, Andrew Tugwell is recognised for his experience in the area of valuation issues. Understanding the valuation process such as the zoning method for retail premises can be an advantage or other ways to analyse evidence and understand valuations.

Common issues include triggering rent reviews, disputes concerning evidence and comparable values or assumptions such as disregarding improvements, rent-free periods, fit-out etc. Dealing with the process of arbitration or independent expert determination can require early advice, including timetables, offers to settle (Calderbank) and hearings.

We also advise regarding appeals and have experience of High Court proceedings challenging independent expert’s awards or even removing an arbitrator for an alleged conflict of interest.

Management Strategy

Co-ordinating termination dates and statutory procedures are key to avoiding uncertainty and enhancing investment performance. How to avoid empty premises/loss of income? How to coordinate termination of tenancies, achieve certainty and deal with re-letting?

The best strategies require advance planning together with an understanding of the process. Tenant’s break notices, lease renewal notices, absent tenants, discontinued or protracted Court claims; the key is likely to establish an enforceable timescale.

We are experienced in a wide range of key strategy matters such as; a landlord’s ability to charge double rent/double value where a tenant remains in occupation, re-gearing leases or documenting flexible lease terms with landlords rolling break options outside statutory protection, acquiring possession/control of premises prior to insolvency procedures, or dealing with arrears proactively and in a practical way.

Forfeiture

Forfeiture of commercial premises was thought of as a quick and cost-effective way to regain control but COVID legislation and the risk of empty premises has to be taken into account.

Failing to deal with tenant default can compound problems and losses. The landlord can bring the tenancy to an end and take back possession if the tenant is in breach. Triggering events can include unauthorised parting with possession, use or rent arrears. Forfeiture is the landlord’s ultimate weapon, but the process is not straight forward and has been the subject of emergency restrictions.

Most landlords consider forfeiture as a last resort in any event. Is it beneficial to forfeit, bringing to an end the tenant’s liability and taking back an empty property? There will be a need to re-let and, potentially, an obligation to pay outgoings and rates in the meantime.

Where the tenant is in occupation but not paying rent (particularly over a protracted period where there is limited prospect of the tenant’s financial position improving) it may be in the landlord’s interest to “cut its losses” and to forfeit the lease if permitted. Regaining control and re-letting might be the best long-term investment strategy. Whether or not a lease can be forfeited in a tenant insolvency situation is a complex area (and is a developing area of the law).

Forfeiture may be available under most modern commercial leases without a Court Order. It can be a cost effective and quick remedy, but forfeiture needs to be exercised carefully. There are essential steps includes serving notice (except for rent arrears), the right must have arisen under the lease and possession must be taken in an authorised manner. Advice should always be taken. Common problems include: –

1. Has the right properly arisen?
2. Is there a statutory restriction or moratorium?
3. Have notices been served correctly?
4. What steps required to enter the property.
5. What if the tenant’s goods are still on the premises?
6. Is the tenant allowed relief from forfeiture?
7. What if a tenant attempts to go back in?
8. Can the premises be re-let?

We have experience of dealing with all the above matters necessary for an effective and lawful forfeiture process.

Neighbour Issues

Noise, nuisance, trespass, access, car parking, over sailing, redevelopment, boundaries and party walls issues

Neighbour issues are not confined to residential property. Commercial properties are likely to be in town centre positions, in close proximity with other owners/occupiers and mistakes can be particularly expensive for landlords who are not prepared. Breaches of neighbours’ rights can trigger damages or delay landlords’ works with serious consequences.

Noise from the use of a property or redevelopment/works is a common problem. We work with surveyors to agree mitigation programmes and can advise regarding rights and remedies. Access, vehicular rights, shared access are important areas. We have experience of advising major businesses faced with the prospect of closing down because of claims that rights of access are limited. Issues can include interference with rights of way or intensification of use. Car parking is another common area where disputes can arise such as the number of cars, times of use, ability to relocate etc.

Carrying out works or redevelopment is a particular problem for neighbour issues such as over saleing, rights of light and noise/nuisance.

Other frequent neighbour issues include boundary problems and party wall issues. These include disputes relating to notices or the appointment of a party wall surveyor and the process of a third surveyor, the surveyor’s costs and what is permissible under the Party Wall Act.