Many will have read the news over the past few months regarding various retailers pleading with Commercial Landlords for rent reductions, Monsoon Accessorise who have 258 stores being the most recent chain to request this. There will of course be Landlords who will agree whilst others will refuse and those Landlords will be within their rights to do so.
Requesting rent reductions seems to be a new trend for major retailers struggling on the High Street and we at Richard Lionel & Partners are being asked this question of how to reduce rent almost on a daily basis.
Earlier this year we learnt that William Hill had written to their Commercial Landlords throughout the UK requesting rent reductions as a result of many of their units suffering due to the legislation concerning Fixed Odd Betting Terminals and Philip Green’s Arcadia Group have also requested the same at many of their outlets.
There was much hype when House of Fraser confirmed substantial rent reductions at many of their stores ensuring their survival. But with most leases allowing for ‘upward only’ rent reviews, how can this be?
It is common practice at lease renewals for rents to reduce which our team at Richard Lionel & Partners often negotiate when representing Tenants.
If at the time of a lease renewal a Tenant can prove their rent to be above the Open Market Rental Value, it is easier and often more cost-effective for a Landlord to agree a rent reduction rather than pursue an inflated rent through the Courts.
Unlike when a rent review occurs, there is also the threat at lease renewal the Tenant can vacate the property if the rent is excessive or unaffordable and few Landlords desire empty properties with no income, no service charge contribution, no insurance contribution and empty rates liability.
The majority of Landlords would rather their property is let to Tenants paying rent instead of forcing them out of business and being left with properties not income producing.
Despite there being no official mechanism within most commercial leases to reduce the rent, if a tenant happens to request a reduced rent and the Landlord is willing to listen and is sympathetic, any rent can be agreed upon, between the parties at any time.
It may be a cliché but as we at Richard Lionel & Partners often say to clients, if you don’t ask, you don’t get!