Menu
London W11 - 31 Notting Hill Gate
25/Dec/2009 - A-Tenant - London W11
The premises, in Notting Hill Gate, London W11 were let in 2004 at £50,000 per annum exclusive for a term of 20 years, with 5 yearly rent reviews. The tenancy is outside the Landlord and Tenant Act 1954. In July 2010, the first tenant (a franchisee of Subway) assigned the tenancy to a new franchisee. Before the assignee took over, negotiations for the December 2009 rent review were on-going, both first tenant and the landlord professionally represented. The landlord, represented by Savills, had proposed £80,000 and after extensive negotiations including Calderbank offers the landlord wanted £72,000 pa whereas the first tenant’s surveyors were at £57,000 pa. The landlord, having initiated the dispute procedure, referred the review to an Independent Expert. Even though the assignee had only just taken over the lease, the review negotiations had reached the stage at which it was necessary to make a decision whether to agree £72,000 pa or allow the Independent Expert to proceed. The fees quoted by the first tenant’s surveyor for acting for the assignee on referral were in the region of £4000 plus VAT, excluding any fees payable to the Independent Expert if the determination of rent were at or greater than the landlord’s Calderbank offer.
The assignee contacted me and I was instructed to deal with the review including the dispute resolution proceedings. (Unlike most surveyors, I do not charge any extra for ‘going to arbitration’ and my total fee (exclusive of VATt) was under half the amount that the previous tenant’s surveyor would’ve charged). Before the instruction was formally confirmed, the Landlord's Surveyor telephoned the assignee direct and intimated £60,000 per annum exclusive would be acceptable.
Some information was passed on to me but otherwise I started from scratch. I inspected the premises and made enquiries I considered necessary. The Independent Expert preliminary procedures were underway. I found several points in the interpretation of wording and phrasing of the lease that did not appear to have been explored, so I issued a Calderbank offer at £57,500 pa to protect my Client’s interest on costs. The Landlord would not accept the Calderbank offer, the Independent Expert was asked to proceed.
Acting as advocate, I presented the Independent Expert with submission of seventeen pages, 7350 words. Because the Landlord owns the entire parade in which 31 is located, together with numerous other shops in Notting Hill Gate, the Landlord’s Surveyor had all the evidence. One could have the impression the landlord was invincible. However, the Landlord's Surveyor was acting as expert witness; a role that, in my view, exposes a surveyor to a need for a considerably more accuracy and compliance with technical expectations. My counter-submission, twelve pages and 5400 words, followed by re-examination (five pages, 1800 words) of the expert witness surveyor’s reply.
The determination was £53,630 per annum exclusive. The landlord paid all costs of the Independent Expert.
--------------------------------------------------------------------
The assignee contacted me and I was instructed to deal with the review including the dispute resolution proceedings. (Unlike most surveyors, I do not charge any extra for ‘going to arbitration’ and my total fee (exclusive of VATt) was under half the amount that the previous tenant’s surveyor would’ve charged). Before the instruction was formally confirmed, the Landlord's Surveyor telephoned the assignee direct and intimated £60,000 per annum exclusive would be acceptable.
Some information was passed on to me but otherwise I started from scratch. I inspected the premises and made enquiries I considered necessary. The Independent Expert preliminary procedures were underway. I found several points in the interpretation of wording and phrasing of the lease that did not appear to have been explored, so I issued a Calderbank offer at £57,500 pa to protect my Client’s interest on costs. The Landlord would not accept the Calderbank offer, the Independent Expert was asked to proceed.
Acting as advocate, I presented the Independent Expert with submission of seventeen pages, 7350 words. Because the Landlord owns the entire parade in which 31 is located, together with numerous other shops in Notting Hill Gate, the Landlord’s Surveyor had all the evidence. One could have the impression the landlord was invincible. However, the Landlord's Surveyor was acting as expert witness; a role that, in my view, exposes a surveyor to a need for a considerably more accuracy and compliance with technical expectations. My counter-submission, twelve pages and 5400 words, followed by re-examination (five pages, 1800 words) of the expert witness surveyor’s reply.
The determination was £53,630 per annum exclusive. The landlord paid all costs of the Independent Expert.
--------------------------------------------------------------------
Biddulph - Sale of leases to Sainsbury's
Sainsbury's wanted to develop a new supermarket in Biddulph, Staffordshire and hoped to start work in 2009-2010.
Part of the site included a parade of shops, with flats above, where I acting for two retailers - SW Cotton, Optician at 44/44a High Street, and Morning Fresh greengrocer at 46/46a High Street - in negotiations for surrender of their leases to Sainsbury's, subject to simultaneous leaseback for a few months until vacant possession was required.
For 44/44a I negotiated almost twice as much as Sainsbury's offered originally. For the lease of 46/46a, I negotiated almost three times as much.
--------------------------------------------------------------------
Part of the site included a parade of shops, with flats above, where I acting for two retailers - SW Cotton, Optician at 44/44a High Street, and Morning Fresh greengrocer at 46/46a High Street - in negotiations for surrender of their leases to Sainsbury's, subject to simultaneous leaseback for a few months until vacant possession was required.
For 44/44a I negotiated almost twice as much as Sainsbury's offered originally. For the lease of 46/46a, I negotiated almost three times as much.
--------------------------------------------------------------------
Bury St Edmunds - saving £87,000 pa
01/Jan/2009 - A-Tenant - Bury St Edmunds
Acting for a successful retailer in East Anglia, the premises are on an under-lease from Homebase Ltd. Like many large companies, Homebase has a residual estate: numerous properties that it used to occupy, but which have long since been conveyed to others. (Around the time of my involvement, according to April 2009 accounts, in the public domain, the parent company of Homebase, Home Retail Group plc, made £117.3M provision for onerous lease charges.) In this case, Homebase wanted to assign its lease with an indemnity for the remainder of the term for a difference in repairing covenants, so my Client would be no worse off.
Terms were agreed in principle. At the onset, I said I should not recommend my Client instruct solicitors until the freeholder’s consent had been obtained. The head-lease contains a surrender-back clause, also I did not want my Client to incur costs unnecessarily. Homebase applied for licence to assign, a draft was submitted by the freeholder’s solicitors, and I was told by the surveyor acting for Homebase consent had been given. However, what was not disclosed until much later on was that the freeholder had not actually given consent, because it was still awaiting reply to its enquiries about my Client’s accounts. [Whether the freeholder’s solicitors, in having issued a draft licence, was enough to deem consent was never resolved: that would’ve meant applying to court for a declaration, which Homebase would do provided contracts to assign were first exchanged, (on condition if the application failed then the transaction would abort)]
As the conveyancing progressed, I started thinking further ahead. Even if the freeholder were shown to be unreasonably withholding consent, I felt my Client would be off to a bad start if the landlord were ordered to consent against its will. No matter the impersonality of business tenancy law, the human aspect in the ongoing relationship between landlord and tenant is important. Then there was the question of personal surety. The underlessee has no surety, which would mean, on expiry of the head-lease when Homebase’s interest ends, and the under-lease is renewed direct with the freeholder, there would be no need for surety in future. (The under-lease is inside the 1954 Act so has renewal rights.) In the head-lease, the freeholder can require personal surety for a limited company assignee. My Client offered an associate company, but not a personal surety. Had the matter gone to court, it is possible the court would have ordered a personal surety with any licence to be granted, which would mean my Client would have been worse off.
The difference in repairing covenant could also cause problems. The under-lease contains a schedule of condition, whereas the head-lease is full repairing. The cost of the difference is estimated at £100,000, at least. I got Homebase to agree to extend the indemnity beyond expiry of the term into any holding-over period, but that benefit would only have practical effect if the freeholder were to serve a schedule of dilapidations whilst Homebase were around. There would be nothing to stop the freeholder waiting until Homebase were out of the picture before serving it on my Client. Similarly, if my Client did not want to renew, then its terminal obligation would be limited. Also, by taking on the head-lease, the under-lease could have been extinguished, losing the benefit in having the schedule of condition continue on renewal of the lease direct with the freeholder.
I concluded the risks outweighed the benefits, so I recommended withdrawing from the transaction.
I have agreed the 2003 and 2009 rent reviews at nil increase, a saving of about £87,000 pa.
--------------------------------------------------------------------
Terms were agreed in principle. At the onset, I said I should not recommend my Client instruct solicitors until the freeholder’s consent had been obtained. The head-lease contains a surrender-back clause, also I did not want my Client to incur costs unnecessarily. Homebase applied for licence to assign, a draft was submitted by the freeholder’s solicitors, and I was told by the surveyor acting for Homebase consent had been given. However, what was not disclosed until much later on was that the freeholder had not actually given consent, because it was still awaiting reply to its enquiries about my Client’s accounts. [Whether the freeholder’s solicitors, in having issued a draft licence, was enough to deem consent was never resolved: that would’ve meant applying to court for a declaration, which Homebase would do provided contracts to assign were first exchanged, (on condition if the application failed then the transaction would abort)]
As the conveyancing progressed, I started thinking further ahead. Even if the freeholder were shown to be unreasonably withholding consent, I felt my Client would be off to a bad start if the landlord were ordered to consent against its will. No matter the impersonality of business tenancy law, the human aspect in the ongoing relationship between landlord and tenant is important. Then there was the question of personal surety. The underlessee has no surety, which would mean, on expiry of the head-lease when Homebase’s interest ends, and the under-lease is renewed direct with the freeholder, there would be no need for surety in future. (The under-lease is inside the 1954 Act so has renewal rights.) In the head-lease, the freeholder can require personal surety for a limited company assignee. My Client offered an associate company, but not a personal surety. Had the matter gone to court, it is possible the court would have ordered a personal surety with any licence to be granted, which would mean my Client would have been worse off.
The difference in repairing covenant could also cause problems. The under-lease contains a schedule of condition, whereas the head-lease is full repairing. The cost of the difference is estimated at £100,000, at least. I got Homebase to agree to extend the indemnity beyond expiry of the term into any holding-over period, but that benefit would only have practical effect if the freeholder were to serve a schedule of dilapidations whilst Homebase were around. There would be nothing to stop the freeholder waiting until Homebase were out of the picture before serving it on my Client. Similarly, if my Client did not want to renew, then its terminal obligation would be limited. Also, by taking on the head-lease, the under-lease could have been extinguished, losing the benefit in having the schedule of condition continue on renewal of the lease direct with the freeholder.
I concluded the risks outweighed the benefits, so I recommended withdrawing from the transaction.
I have agreed the 2003 and 2009 rent reviews at nil increase, a saving of about £87,000 pa.
--------------------------------------------------------------------