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Recent announcements by the Arcadia Group and Thomas Cook that they will not be renewing 250 and 200 respectively of their shop leases, which are due to expire shortly, have sent shockwaves through the retail sector. A recent survey by the British Property Federation also sets out some of the challenges facing shop landlords in the current economic climate.  The survey claims that, in real terms, average retail rents have fallen by over a third in the last two decades, after allowing for inflation.  Leases of 20 years were once commonplace; now leases for  less than 5 years are normal.  Landlords are having to become ever more flexible to attract tenants and ensure that they are not faced with empty shops. One way doing this is the “meanwhile lease”, which is roughly the commercial equivalent of putting furniture in the flat that you  are trying to sell so as to make it more attractive to a buyer.

 

The Meanwhile Scheme  (www.meanwhile.org.uk) is a government-led initiative to encourage the temporary occupation of a vacant business property for non-commercial purposes, such as arts projects, in properties that the temporary tenant might not normally be able to afford.  There is an explicit acknowledgement that the landlord is looking for a tenant to take a commercial lease of the premises.  The “meanwhile lease” is an attractive mechanism for landlords as it enables them to avoid, or at least minimize, empty rates liabilities.  Although, typically, the temporary tenant will not be liable to pay rent they will pay for the cost of the supply of utilities to the property and will also be responsible for keeping the property in good repair and condition which will obviously increase the possibility of attracting a commercial tenant in the long-term.

 

In the face of these tough economic conditions, landlords may be required to take a “commercial view” using “non-commercial” means.       

 

You can speak to Surjit by calling 020 8858 6971 or contact him via e-mail sbansal@grantsaw.co.uk   

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