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Expert knowledge is best lever in lease negotiations

Mar 22, 2018

Expert knowledge is best lever in lease negotiations

Martin Hughes of Barker Storey Matthews makes the case for the value of instructing agents in matters of lease negotiations.

Changes in retailing have seen the plight of chains such as Toys R Us and Maplin make the news recently, as well as some restaurant traders such as Byron.  Businesses who are facing financial restructuring will always look to reduce fixed costs such as rental and this is where the value of instructing an agent for lease negotiations - at any point in the life of a lease - can be realised, whether landlord or tenant.

In representing either landlords or tenants in lease negotiations, regardless of whether the prevailing economic conditions are good or bad, professional property agents will come to the table to make the case for their client’s position in the context of the local property market.

Tenants will always be in a strong position in lease negotiations where there are high vacany rates of similar commercial properties.  Landlords are in a more commanding postion where the local market conditions are reversed and vacancy rates are low.  An agent’s role, in representing either party, is to negotiate lease terms that reflect these factors, among others.

For instance, in Peterborough’s retail sector - in which food and beverage operators fit - vacancy rates are low at 4.5 per cent set against the national average of 12 per cent.  Landlords enduring void periods are not the norm in the city centre here.

However, in approaching lease negotiations - whether at the beginning, mid-lease or at the point of renewal - it is more than just vacany levels which should inform either party’s position in considering their place in the local market.

This is where the skill and knowledge of an instructed agent comes in to play to identify where appropriate or inappropriate lease terms are being proposed by either party whether it is concerning, tenant break options, a review clause or matters of repair, dilapidations or service charges.

Lease negotiations are, by their very nature, detailed and so can be time consuming.  Where agents are appointed to act on their behalf, landlords and occupiers can get on with their core, day-to-day business confident that their interests are being best represented.

As leases touch matters of law, they can be adversarial but agents, in representing their clients, will always emphasise the benefit of negotiation with evidence-based advice.

Admittedly, professional costs are always considerations for landlords and occupiers but good advice is rarely overpriced in the long term.

For more information about lease negotiation and valuation services see bsm.uk.com/valuations/.

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