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Impatient Landlords Risk Losing Out- 03/03/2010
Commercial property landlords risk losing substantial amounts of time and money by allowing tenants to move into their premises before signing a lease, warns a leading Shropshire commercial property lawyer.
Matthew Lloyd, an associate in FBC Manby Bowdler LLP’s Commercial Property Department, says that the desire to avoid paying rates on empty buildings and maintain a rental income is blinding landlords to the dangers of letting tenants have access to their property without a written agreement.
“The reduction in rates relief on empty buildings has added substantially to landlords costs, who are now being driven by sheer economic necessity to do deals with tenants they would not have contemplated before the Credit Crunch,” says Mr Lloyd, who is based in FBC Manby Bowdler’s Telford office.
“But allowing tenants access to premises effectively gives tenants the upper hand, by removing any pressure on them to negotiate on rent, or to sign a lease.
Although this situation creates a Tenancy at Will, these do not oblige the tenant to make any repairing provisions and if the tenant is paying rent on a regular basis, with the help of the courts, this could see the tenant gaining rights to remain.
“It is far better for the landlord to have some patience during the negotiations and agree a short lease, of say two to three years, with annual breaks, to give both the landlord and tenant certainty over what has been agreed.”
Mr Lloyd also warns landlords about accepting cash payments from tenants who want to move into commercial premises immediately.
He says: “We are aware of a number of instances when a potential tenant has offered cash up front to pay the first six months rent, and in some cases the landlord has been tempted to accept and allowed the tenant into his premises.
“Unfortunately without any documentation regarding a lease, there is no proof for the local authority that the premises are now occupied and that the rates burden falls on the new tenant, leaving the landlord still liable for the rates.
“Worse still, if a deal is completed on a cash basis then the landlord should be wary that there is a risk that the tenant may want to use the premises for some illegal purpose, costing the landlord time and money at a later date,” concludes Mr Lloyd.
With 40 qualified staff in offices in Shrewsbury, Telford and Bridgnorth, FBC Manby Bowdler is one of the largest law firms in Shropshire.