The traditional assumption that tenants want a longer lease than the landlord wishes to grant has been ‘stood on its head’ by economic uncertainties and Brexit-related relocation concerns.
Writing in NLJ, Rupert Reed QC, Serle Court Chambers, says: ‘After the financial crisis and Brexit, there are real concerns for tenants, including the subsidiaries of international groups unsure of their continued presence in the UK.
‘Some look to consolidate their operations in a smaller number of premises. Average lease lengths are falling, and negative economic expectations mean that leases with shorter terms command higher rentals. It is increasingly the tenant which seeks a shorter lease in referring to the need to maintain flexibility in volatile market conditions.’
Reed says the courts will need to look back to earlier lines of cases in considering the potential hardship to landlords. These are not just higher bills for refurbishment, re-letting and legal costs, but a reduction in capital value off a higher yield, significant accounting losses and in many cases real damage to portfolio performance.
Reed asserts the letting market can no longer rely on old assumptions, and outlines the factors the courts will need in balancing the interests of both parties to the business tenancy (see Under pressure? New business tenancies)
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