As a result of the current economic climate, there has been a significant but subtle shift in power between commercial landlords and tenants.

With units sitting empty, bank facilities for property investors more elusive and increases in the number of businesses going under, those tenants who are either looking for new premises, coming to the end of an existing lease, coming up to a break date or even just those with a good covenant may find that there is a lot more potential in the current lease market than was available to them previously.

For those looking for new premises, potential incentives abound. Whether these are rent free periods, contributions towards fit-out costs or simply more favourable lease terms, landlords are competing to get tenants to sign up. It is therefore worth time and effort asking questions and shopping around for the best deal. It may also be worth the cost of appointing an agent on your behalf - the costs potentially being offset by the deal they are able to get you on the back of their specific knowledge of the market.

Those tenants coming to the end of an existing lease or coming up to a break date may also find their landlords far more eager to negotiate than may previously have been the case. For the landlords, keeping the same tenant ensures they are not left sitting with an empty unit and also saves them on marketing costs. It may be worth offering more favourable rent or other lease terms. Tenants should therefore consider whether any deal offered by another landlord outweighs the moving costs and professional fees of entering into a new lease.

Finally, even if the tenants are tied to an ongoing lease, there is no reason why they should not seek to re-negotiate the terms of that lease with their landlords.  One of the worst scenarios a landlord could find him or herself in is to have a tenant who has gone into administration or liquidation etc.  Not only would they have to compete with the tenant’s other creditors for payment of any rent arrears and ongoing rents but they may also find that they are unable to recover possession of their property - insolvency practitioners benefiting from certain statutory protections against removal.

Where cashflow is an issue (and even where it is not), tenants may find that landlords are currently far more amenable to accepting monthly rent payments rather than quarterly, reductions in rent or rent holidays, foregoing rent reviews, changing the basis on which rent is calculated (e.g. switching to a turnover rent), shortening lease terms etc simply out of fear of being left with nothing when, in the current recession, they are least likely to be in a position to deal with it.

In short, there is nothing to be lost by asking!

For further information please contact Jane Ramsay on 0131 226 8222
or email jane.ramsay@mbmcommercial.co.uk