Commercial landlords and tenants both face winter of discontent

November 3, 2022

Too often, business relationships or transactions can be a zero-sum game: one party’s gain is equivalent to another party’s loss. It can so easily go that way in commercial property, from large offices to small high street shops; but concerns about inflation and interest rates have both landlords and business tenants losing sleep and keen to find solutions so that both can move forward.

Historically, property has been seen as a good hedge against inflation. Landlords have been able to lift rents to help offset their own rising costs. This is fine if a strong economy is driving inflation and there is a good chance that buildings will stay full. Not the case now. Businesses are stretched, they’ll struggle to pay more rent and many landlords can only dream of a hike in income. Owners of shops, hotels and offices funded by debt face lower returns on assets that may be due a valuation correction.

The picture is further clouded by the recent ending of the arbitration scheme set up under the Commercial Rents (Coronavirus) Act 2022. All remaining restrictions, aimed at protecting businesses,  have been lifted on winding-up petitions and Commercial Rent Arrears Recovery (CRAR) action. No further referrals can be made under the Scheme and all landlords’ rights and remedies are restored.

A high proportion of the assignments we undertake at Buchler Phillips have some sort of real estate element. The Covid pandemic showed how property, or at any rate the cost of owning or using it, is central to so many businesses.  Now, the post-Covid, post-Brexit, Ukraine war-impacted economy is putting the same pressure on commercial property relationships, with owners (landlords) facing rent defaults and voids as business occupants become unable to operate and may even close their doors for good. We’re currently seeing increasing numbers of enquiries from tenants facing demands from landlords unable – or unwilling – to allow any compromise on lease terms and landlords, freed from the Coronavirus restrictions on actions are clearly upping their game in this respect.

As in our turnaround and restructuring activities, our favoured approach in resolving real estate issues is to find constructive solutions in the best long-term interests of both parties in a contract. Unlike several legal advisers, we do not work exclusively with either landlords or tenants. Our focus is far wider than mediation: our team’s first-hand experience of working in property development and investment across many areas of commercial real estate, equips us to develop solutions that benefit all stakeholders. These may include:

  • Turnover based rents
  • Deferred service charges and other costs
  • Revised lease breaks
  • Lease extensions
  • Timings of rent reviews
  • Debt negotiations with commercial lenders

But wearing our Insolvency Practitioners’ hats we’re not afraid to look at insolvency tools and options to bring both sides to the table. As ever, maintaining a dialogue with business partners is crucial. If help is needed to plan for those discussions or to devise settlements, the time to act is sooner rather than later.

Written by Jo Milner, Managing Director at Buchler Phillips, the UK’s leading independent corporate recovery, restructuring and turnaround firm.


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