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Lease Re-gearing – A “Win Win” For Tenants and Landlords Alike

May 2, 2013

Barker Storey Matthews act for a variety of landlord and tenant clients in commercial property matters.  Over the last couple of years we have been instructed to act in a number of instances of lease re-gearing, offering a potentially beneficial outcome for landlords and tenants alike. 

Lease Re-gearing – A “Win Win” For Tenants and Landlords Alike

In the current climate, for landlords there are obvious concerns when a lease is nearing expiry.  Traditionally a landlord would serve a S.25 notice 6 months prior to a lease end (assuming a protected tenancy) but if a tenant has performed well under the existing lease then the uncertainty of a void period with empty business rates liability and dilapidation issues can all be removed by early negotiations with the tenant, even several years before lease expiry.  In addition, particularly with longer leases, the landlord can see the investment value of the property diminishing as the remaining lease term depletes.  Re-gearing with a new longer lease can significantly increase the investment value of the property.

For tenants wishing to remain in occupation, benefits can include a rent free period or other incentives including capital contributions towards, say, refurbishment.  The financial benefit to the tenant of not having to physically move can also be significant.

Lease re-gearing often calls for an experienced Chartered Surveyor, familiar with commercial property, to renegotiate terms acceptable to both parties and arrange for this to be formalised by means of a Deed of Variation, or surrender of the existing lease and granting of a new lease.  The flexibility of re-gearing means that landlords and tenants can both enjoy the benefits through early communication.

BSM director Michael Beardall, based at the firm's Huntingdon office comments, "we have handled a growing number of lease re-gears this year. Specialist knowledge of leases and particularly of local market evidence is essential in achieving the best terms.  Landlords and tenants alike might be pleased and surprised at the outcome of our involvement".


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