LEGACY OF RENT CLAUSES IN SOUTH WEST

Disputes between commercial property owners and their tenants continue to cause problems across the South West because of upwardly-only rent review clauses in leases, says commercial lease expert Chris Dawson of Colliers International.

Many leases signed around Bristol and the South West before the economic downturn only had provision for the rents to rise at rent review and now many tenants are trying to change the clause and calling for lower rents as the economic downturn bites.

This week the Irish Government, which had announced it was planning to outlaw such clauses, scrapped its plans after it was feared that landlords who lost out could launch compensation claims.

Chris Dawson, director at Colliers International Bristol office said: “We have all been watching the situation in Ireland closely as there was a feeling that if they scrapped upwardly-only rent reviews for commercial property then pressure would grow for the UK to follow suit.

“The u-turn in Ireland is good news for landlords but a blow for those tenants who are paying rents that were agreed in the boom years and which now look well above the market rate.

“It is becoming a major issue across the South West but there are solutions and compromises to be found as long as both sides are willing to negotiate and talk.

“We are seeing shorter term leases being signed these days and getting the balance right between length of lease and rental level is the key to keeping both sides happy. Keeping buildings occupied at a fair level that gives a good return is the aim of all good landlords.

“In hindsight many of the upwardly-only leases signed in the past now seem generous when looked at in the context of today’s economic circumstances. It has led to more disputes but also to landlords agreeing to keeping rents at the same level when the review date comes around.”

Upwardly-only rent review clauses in leases have been commonplace in the UK and were particularly popular in Ireland when the “Celtic tiger” economy saw property prices rising faster there than anywhere else in Europe. The challenging economic climate means they are now less common, even if the prospect of actually making them illegal has diminished.

ENDS

Issued on behalf of Colliers International by Empica. For further information contact Martin Powell (01275) 394400.