Weathering the storm
During the daunting financial times we all currently face, both a commercial landlord and a commercial tenant should be aware of the ways in which they can both maximise their investments by working closely together. A good relationship is key but what can a commercial landlord and commercial tenant do to protect themselves in this ever changing market? This article gives a commercial landlord and commercial tenant an idea of what they can be doing to try and weather the current “financial storm”.
Five key points for a Commercial Landlord
- As a landlord you should check that the payments your tenant is making are being made on time. If they are not, then it is advisable to check the lease to see if you are entitled to charge interest on any outstanding sums that may be due.
- You should make sure that you inspect the property regularly. If there are any dilapidations that need resolving by your tenant then you should make sure that these are dealt with promptly and sooner rather than later.
- If you are made aware that your tenant is having difficulty paying the rent for instance, you should make contact directly with the tenant to try and establish the reason for this. Essentially, you should find out whether you can do anything to assist your tenant. Perhaps you may consider payment of the rent monthly in advance or monthly in arrears rather than quarterly.
- You should make a point of looking at the rent review provisions in the lease and check whether the reviews have actually been undertaken. If they have not, you should check the lease to see if you are entitled to undertake a rent review.
- It is advisable for you to check the lease and see whether the current term has in fact expired. If it has, then perhaps you should consider terminating the lease, in the appropriate manner, so that new terms can be agreed with your tenant.
Five key points for a tenant
- If your cash reserves are becoming low, you should check the provisions in the lease that deal with “subletting” and “assignment”. For instance, could you sublet part of the premises to free up a bit of space and create some cash flow?
- You should make sure that all payments under the lease are paid on time to avoid incurring interest on any outstanding sums. If payments do become a problem it is advisable for you to liaise directly with your landlord.
- Liaise directly with the landlord to see if he would consider reviewing the payment intervals.
- If you are really struggling in making the payments under the lease, you should review the break clause provisions and see whether you can terminate the lease early. You should also check what process you need to go through to exercise the break clause.
- In this current financial market it is always advisable to have a good credit control system in place which is of course crucial to your cash flow.
- You should therefore make sure that you have a good system in place to chase up debtors.
- Although these tips give both a commercial landlord and a commercial tenant a starting point to weather the current financial storm, legal advice should always be sought on the terms of the lease before any action is taken. Not only that but the key to surviving these daunting times is for both the landlord and the tenant to form a strong bond and to work in partnership with each other. If you would like to discuss the contents of this article further or would like advice on any commercial property matter please contact Robert Sprake on 01905 723561.
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