Tennant wants to split premises

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    Tennant wants to split premises

    I rent a commercial premises to a high street retailer. At the moment the retailer is enjoying a rent free period. They have asked if they can split the current premises to accommodate another retailer, which is part of their group. I was wondering if anyone is aware of potential issues with allowing them to do this? I’m also wondering if you think it would be reasonable to ask that the rent free period is reduced, in exchange for letting them make this alteration to the premises? Thanks in advance for any comment/guidance you can offer.

    #2
    This is very much a property specific question. You need to take the advice of a commercial property surveyor.

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      #3
      get the TENANT (two N's not three) to Surrender the existing lease and take two leases. That way if they sell off the other retailer which is at present part of the same group, you are not left with a mess. Most well drawn modern commercial leases (including the Law Society Preprinted one) have an absolute bar of underletting of part.

      If you want to be really nice, tell them that you would enter into a licence so long as your costs are paid such that so long as the other retailer remains part of the same group of companies as defined by the Companies Act you have no objection to the premises being physically divided, and on the basis that bythe end of the tenancy you aqre entitled to have the premises reinstated as at present. Don't agree to anything without formal documentation. Everything must be marked " strictly subject to formal licence"

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        #4
        Whether the OP grants two leases has to depend on whether he wants to have the right to require any partition to be removed. Also, the question is whether on review the rental value is higher letting as one or two units. There are any number of valuation questions to be considered which is why the OP should consult a surveyor.

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          #5
          Several things come to mind. First of all alienation - is there a group sharing provision in the lease? If there is then subject to complying with the terms of the clause it may be permitted. The tenant would likely still need to work with you assuming a normal alterations clause.

          Given the state of the high street, to me it would seem churlish to not consider this seriously. Generally two shops are worth more than one larger shops due to the effect of quantum. If there is no group sharing provision I would be tempted to allow it, subject to an uplift in rent, and reinstatement at the end of the lease.

          Do bear in mind covenant strength and how likely it is that you will see the retailer through to the end of their lease, given the high street uncertainties.

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            #6
            Thanks so much to everyone who have been kind enough to provide advice. I'll be consulting a surveyor and will bear in mind all of the advice given.

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