Property Auditing | Breaking a Lease Part 1 | The ‘why’
Introduction
Breaking a lease is often a last resort, when pleas for renegotiated terms have fallen on deaf ears, and consequently it is not to be undertaken lightly. It requires careful and precise planning.
Every business has its own specific property needs and requirements, therefore nothing written here represents advice. There are however various reasons why landlords and tenants may decide to exercise a break; all of the specific tenant obligations in the lease will inform that process.
Commercial Change
As we are seeing at present, there is concern about the rising cost of living and consumers are tightening their belts. This is causing retailers to reconsider product ranges and client offerings, which in turn will cause businesses to consider revised store formats and layouts. This is one example of how commercial change can have an impact on the requirements of retail premises.
Inevitably though, some premises are not able to be easily reorganised to accommodate these changes and ultimately, where lease terms allow, lease breaks can be considered and planned into that change process.
2. Portfolio acquisition
Growing retailers often expand through the acquisition of a smaller competitor or complimentary business. Following this, there will be a process of rationalising the combined store portfolio; considering break options will be a necessary part of this.
3. The landlord’s prerogative
On the other hand and for their own reasons, the landlord may wish to serve a break notice to obtain their property back. When a potential break notice from the landlord is approaching, it is wise to be prepared and ensure the landlord sees you as a good tenant – especially if you wish to retain what is a good lease for you.
It is vital that businesses are aware of the break clauses written into their leases and ensure that, as these approach, the relationship with the landlord is managed well, so as to achieve your goals for that property.
Conclusion
Whatever the reason for a lease break, it is crucial that professional relations between the tenant and landlord are maintained; sound management of lease breaks should be an integral part of this. This is obviously made easier if those relationships are strong from the outset, and so establishing these at the start of your lease is crucial for long-term success.
The expertise within Contractus enables us to assist businesses with their property premises, ensuring that all payments are in order and any anomalies are dealt with expeditiously, leaving you better-informed for future negotiations.
How can we help you?
Visit our property services page to learn more about how we can help you.
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