http://www.michaellever.co.uk/index.htmlMichael Lever Newsenhelp@michaellever.co.ukCopyright 2009 Michael Lever1994-06-01T00:00:00+01:00 hourly 1 2000-01-01T12:00+00:00 Wed, 3 Mar 2010 16:32:42 +0000help@michaellever.co.ukCustomer ServiceRetailing1994-06-01T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1994#unique-entry-id-95http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1994#unique-entry-id-95It may be that some think that, because life is hard for retailers, customers should be grateful for small mercies, but whether retailers consciously make life difficult or are simply ignorant of how to make life easy, it would pay more to understand what customer service is really about. To retailers, a customer represents profit, but transactions must accommodate quirks because, to receive the full benefit of custom, individual customer requirements must be respected. From the customer=s perspective, consciously or not, the decision to enter a shop is pre-meditated. The desire to associate is strong so, when the potential for contribution is spotted, the customer wants to help the business in some way, at some level. The word >service= means >help= so, because we enter and form relationships to help one another, service, when put to use in a relationship, means >to help and be helped=. Service reinforces relationships and is the hallmark of a caring and trustworthy business - ie, attributes that enable the customer and retailer to each profit in their own ways from the experience.

The deciding factor that will bond relationship is the effect on >self=, so it is vital that individual customer expectations of corporate image are met. Many retailers go wrong by giving an impression that they care about customers when, really, they care more about themselves, staff and shareholders. In the Financial Times recently, a letter about electorate apathy expresses a feeling amongst voters that politicians regret the existence of the people they are paid to represent, so reciprocate the contempt by not voting. Similarly, retailers are fond of changing the colour, but never changing the tune. When customers are served indifferently (or feel they are), some complain (if they want to be helpful) but more fragment spending and, through “disloyalty’ cause flat demand. Why so many mobile phone retailers, for example? Because Carphone Warehouse is not as good as it likes to think.

Retailers take their cue from customers and customers reflect reality so, through an interdependent relationship - ie, each helping the other in ways that will enable each to progress easily - business direction synchronises with attitudes. Retailers often become prosperous through having entered the market at the right time with the right products at the right price, but the real test of achievement is success in a downturn. Because most people are inhibited by a desire to be popular, individual complaints precede mass requirements, but to ignore lone sensitive voices is to imagine immunity from error. As retailing is an ego-driven business, retailers doing well not only have a tendency to become patronising but also think themselves anthropocentric. The fact is that retailers are not central to the customers= being. Customers do not owe retailers a living and retailers must earn and show respect to receive support. Therefore, when retailers give the impression that they are doing customers a favour, the customer is made to feel small for wanting to be helpful. Rejected customers display dissatisfaction and, as word gets round, others become more aware of the retailer’s attitude.


When directors know something is going wrong, but do not know what to do, instead of asking for help, they lie to protect ego and exacerbate the mistake. To be dishonest with oneself is a shock to the system so intuition clouds with worry. In confusion, friction arises in relationship and arrogance can treat subordinates as robots. Suggestions are scorned and critics are ridiculed. When logic overrides feeling (or vice versa), the approach to problem solving is rejection but, without transformation, all that happens is dispersal and re-emergence. When social relationships become irreconcilable, fear of being alone again often causes the person who wants to quit but lacks confidence to break the habit to instead make togetherness so unbearable that the other leaves. In business, the rejecting principle sabotages aspirations, halting progress until strategy and reality synchronise - eg, M&S, Arcadia, C&A, Body Shop, Kingsfisher, Safeway, Bhs, etc. Whilst management may want to conceal the facts and give the impression that it=s business as usual, the truth seeps out through staff and problems emerge in products and/or the way the customer is treated.

The challenge for anyone in retailing is that liking people and wanting to serve are prerequisites, so it is fascinating how few qualify. Whilst it is suggested that there is a shortage of people with the right attitude and that one cannot change human nature, if that is the approach to training, then it is not surprising that standards are low. In practice, problems are not caused by human nature, but by the adverse effects of cultural conditioning on human nature. In reality, psychological upset worsens because, as directors like to be in control, they foist ways of communicating, damaging confidence by obliging staff compliance with the company textbook, regardless of customer requirements. In effect, service is artificial whereas the customer wants a real experience. Perhaps a deep longing to serve is why retailers warmed to the challenge of Bluewater? And because of habitual complacency, why one-fifth of retailers in Bluewater, including Boots, trade below target or expectations?
A hurdle overcome by the Bluewater ethos was getting retailers to co-operate by agreeing to be part of the whole. Integration marks a reversal of the late 1970=s change when many retailers, instead of being content to serve the community, decided to focus on target customers - latching on to the trend from >the more you put in, the more you get out= to >what=s in it for me?= As retailers learned how to direct market themselves, they could afford to lose >difficult= customers because, without a credible alternative, customers had to be accommodating. Thus, the English propensity for not making a fuss has been exploited to a fine art, enabling the retailer to focus on people who can be relied upon to compromise. However, if the Bluewater model reflects consumer aspirations generally, then retailers must understand why they should put themselves out to be helpful because, thanks to change helping the emergence of the confident individual, the customer is no longer as accommodating.

Retailing is like sharpening a pencil, but a linear approach to business development will snap the point. Rejecting help, not listening, provides rich pickings for those who thrive on mistakes. Organic growth is an evolutionary spiral, merging socialist and capitalist ideology into a network of social capital, weaving into opportunities and away from problems based on help from all directions - above, below, inside and out. When costs are geared to rigid expectations, the slightest error of judgement will avalanche expenses. Troubled retailers in prime positions become property plays, so downside can be contained, but to increase profit and provide totally satisfactory customer service, sides must be taken. For example, in defence of high prices, retailers cite land values when the truth is that strategies are based on what the market will bear. And, whilst legally correct for M&S to label houmous containing GMO soya as “suitable for vegetarians”, the opportunity in service, as Malcolm Walker of Iceland knows, requires respect for consumer concerns about food safety.

As the French might say a good idea in practice, but will it work in theory? Costs can be reduced, related businesses acquired and savings made, but there will come a time when everything is so finely tuned that the only option is to boost demand. The theory of business is the reality of profit. Axing graduate intake was a move in the right direction for M&S because customers expect profit to be reinvested for the benefit of customers whose interests should always come and be put first - ie, before career aspirations of staff or income for shareholders. Be warned: retailers on the Internet can charge lower prices to boost turnover but, in due course, non-tech customers will only want to pay more for the >privilege= of shopping in shops if they also experience service. And, without improving relationships through service, how are retailers going to cope with street-wise customers who browse freely in shops and then buy branded goods via the Internet, at lower prices from other companies?

In reality, customers want the irresistible combination of service, quality products and low prices; and are flocking to retailers that offer excellent value for money. Retailers who say that service comes at a higher price may have resources to resist change as they try to prolong their obsolete ethos by redesigning formats, but customers are tired of being accommodating. And when customers discover that Wal-Mart treats them like gods, they will expect the same attitude from everyone else.
]]>help@michaellever.co.ukRentInvestmentYieldNewsletter1985-06-01T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1985#unique-entry-id-94http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1985#unique-entry-id-94The current trend for private investors in the retail market to be more concerned with short term gain than long term income is worrying.

Participants seem to have overlooked the fact that the essence in capital gain to date owes more to previous levels of inflation than to design~ And even if high inflation does return, the retailing revolution will stultify any likelihood of a repeat boom.

Many new investors believe that rental value reflects expected investment yield, based upon the price they have paid. ln fact, investment value is calculated by reference to the level of rent and not vice versa. However, high prices paid for some investments can only reflect a very optimistic view of rental value. With the exception of property formerly owned by notedly cautious landlords, the idea that the previous owner must have agreed too low a rent, especially if set during the period 1981-1983, is too simplistic. By having always to aim for the top rental on review, to cover purchasing expectations, any failure to achieve the objective rubs off on the relationship with the valuer whose advice is dismissed as 'negative.'

The tenant becomes saddled with a difficult landlord and often with a rental commitment far above the economics of his business. In the open market, cyclical change is inevitable, but in the quest for short term gain, while the loss of one particular tenant may not matter, it is the collective effect of the pressure for high rents which radically affects long term stability, since there cannot be capital gain without security of income.

In the past, investment values have had a useful way of adjusting to their owners' low inflation mistakes, but with changes in the pattern of retailing, and high interest rates, the margin for error now is very The investor who overpays, through ignorance or greed, only to find that the resultant yield, following review, is well below comfortable resale price will have to fund the shortfall somehow. While it is churlish to insist upon strict consideration of investment criteria, since the pressure to use substantial borrowing facilities dominates the market, the problem is unlikely to grow. ]]>help@michaellever.co.ukSecondary ShopsInvestmentSupermarketSunday TradingNewsletter1984-12-01T00:00:00+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1984#unique-entry-id-93http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1984#unique-entry-id-93The historic development of shopping centres makes fascinating reading. Originally, as people went to market, so came permanent shops. In the post-war housing boom, shops started going to the people and even today, new council housing estates boast a block of shops.

The radical change in socio-economic patterns, and the real decline in the cost of transport, means that today, people go to the shops and the goodwill generated by the major operators in all sectors of the retailing market is sufficiently established to influence the prosperity of shopping centres.

When the idea of Brent Cross Shopping Centre was conceived in 1959, it would probably not have been anything like as successful a concept that it is today. In the early 1960' s, shopping development was confined to traditional shopping centres, and precincts, such as the Arndale Centres, were built on land fronting the High Streets. The first suggestion that people might be persuaded to shop away from the traditional pitches was introduced when the second-generation food supermarkets, such as Tesco and Sainsbury started to move to fringe positions so as to provide on-site parking and loading facilities for their customers.

The need for food is the common link between all people. As it is a perishable product, with people having limited facilities for bulk storage, shopping for food is the main reason why most shopping centres attract daily pedestrian flow. If you take away the food shops, technically known as convenience traders, you also remove the spin-off for durable and service traders.

It is clear that the future of food retailing lies in the free-standing purpose-built supermarket located in an accessible position and offering excellent parking and loading facilities. The strength of buying power for and competition between the major operators means that retail prices are particularly keen. The independent grocer has seen his market share decline gradually since the 1950's and butchers, greengrocers, off-licences, fishmongers have all been hit hard. The ubiquitous confectioner, tobacconist, newsagent only survives because the major wholesalers of newspapers operate retail CTN outlets themselves. The private retailer with expansion ambition knows that the future for retailing must be to take units in busy positions, which are not completely dependent upon the whims and loyalties of local custom.

The importance that the presence of a food supermarket has on shopping positions is still underestimated. The closure by the Co-Op of many neighbourhood supermarkets has had a devastating effect on many local centres. Like cigarette brands, people are loyal to their favourite supermarket group and even if the old 'Tesco' is replaced by an individual grocer, offering the cliches of personal service and flexible opening hours, the damage is done. Local grocers won't survive for ever on people buying a pound of butter at 10 pm. The key to establishing some hold on the market is to contain costs, as there is always scope to participate in automatic local potential, especially as not everyone wants to shop at a superstore. In fact, the major groups are generally pleased that corner and local shops continue because they operate in different markets and, of course, it would be political suicide to admit to their extinction. However, the products are still the same and most shoppers are price conscious.

The top supermarket operators invest in research. They plan well-ahead and commitment to a development programme involving millions of pounds allows for the short term hurdles in favour of long term success. In the same way that the institutional and major landlords are actively selling secondary shops, so the major and multiple groups are actively vacating obsolete trading positions. Apart from the food groups, the other' enemies within' (so far as the secondary market is concerned) are the DIY, furniture and electrical groups, such as MFI, Harris Queensway, Payless, Texas Homecare, Do-It-All, Comet, B & Q, Homebase, etc, etc. Clamour for revision of the Sunday trading laws adds fuel to a fire which has already devastated the small retailer and is now creeping into the entire secondary centre.

This year's CBI-FT figures for Christmas trading predictions mention the local shop's expectations, for the first time. Any trip around secondary shopping centres this year would have indicated the noticeable absence of extra pedestrian flow. In my opinion, 1984's Christmas trading period will mark the beginning of the secondary trader's dread of this traditional time. In the past, all shopkeepers used to look forward to the seasonal upturn, but the rot started last year when shoppers spent a fortune in the High Streets and superstores and this year will prove no exception.

Supporters of the relaxation in Sunday trading laws claim more consumer choice and new jobs. But it is blatantly obvious that the small retailer will be squeezed out by the major operators. Important shopping areas, like Oxford Street, will benefit but the axe will fall on the rest. The new growth area for unemployed will be the self-employed retailer whose business is totally dependent upon pedestrian flow generated by the goodwill of others. Few local retailers actively market their stock; they are inter-dependent upon the collective benefit generated by being in a successful shopping centre and without the presence of national companies, generating national advertising and goodwill, there will be little incentive for local people to shop, except for the occasional item.

The future for the secondary shop will rest upon the retailer's personal ability as a retailer, highlighting the fact that few shop-keepers are retailers. The double glazing showrooms are a good example of a modern approach to retailing. They are shops for the visible storage of goods sold by the operator, through advertising and direct marketing. Too many shopkeepers have become complacent; they are used to people walking in automatically instead of actively attracting their interest.

If secondary centres do become the equivalent to an overcoat for shoppers - only needed when absolutely necessary - then the future expectations for investment growth must be limited. In establishing the future importance of a secondary centre, close attention should be paid to the size of the premises occupied by the supermarket operator to ensure it meets modern requirements and also upon the identity of the operator, as this defines the nature of the catchment area. It is important to monitor the locations in which the major operators take sites for their new stores. Most pop up in local and secondary areas because that is where land is most available. The benefit to the surrounding centres, however, will be dependent upon each individual retailer's ability to capitalise on the presence of the extra pedestrian flow by gearing his corporate image to the needs of the people.

Landlords have a role to play in maintaining the balance of trade in a secondary centre. On receipt of applications to change the user, the landlord should refuse consent if the proposed user appears to be in direct competition with established traders. It comes as a shock to many individual shopkeepers to be told that the rent for the premises is not calculated by reference to their ability to pay it. The level of rents in many secondary centres has already reached a peak at which, combined with the effect of rates, ever increasing overheads and declining revenue, they are now seriously affecting the stability of the centre.

Careful choice for investment is fast becoming essential. There will always be opportunities for growth, but a blanket assumption that all secondary areas will continue to prosper is a fallacy. I predict that investors who expect the percentage increases in rents applicable in the five year period from 1979 to 1984 to be repeated for the latter part of this decade are likely to be very disappointed despite the research!]]>help@michaellever.co.ukFinanceGrocery1985-06-01T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1985#unique-entry-id-92http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1985#unique-entry-id-92
If the banks start to examine the viability for grocery businesses, they will discover that the real profit comes not from trading income, but from re-sale of the business, once toil has been converted into turnover. The independent grocer has seen his share of the grocery market drop to below 10% of the total, with the balance dominated by the few major groups and the co-operative movement, operating purpose-built supermarkets and out-of-town superstores. These groups trade in clean, modern environments with an extensive stock range, proper parking facilities and attract the real spending-power. There will always be scope for the independent retailer, providing a specialist service with, for example, longer opening hours or for pure convenience shopping, but unless the trader's buying power carries sufficient clout to maintain competitive prices, turnover is likely to be relatively static, once local potential has been established and may not keep pace with inflation. The problem is rubbing off into the investment market where supermarkets let to substantial 'plc' covenants are fetching fancy prices reflecting review expectations. Whereas 'household name plc' will obviously trade profitably on a historic rent level, any increase to current market value is likely to hit below the line as economies of scale react. To most efficient retailers, the level of rental is usually a nominal percentage of turnover but combined with the annual increase in the other running costs, a rent increase, albeit to proper levels, can kill viability. Under the present system of financing, assignment to the ubiquitous 'Mr Patel' will be possible, but if the survival of the business depends totally upon anti-social trading hours and an uneconomic business approach, geared to capital profit only, then the major companies who are committed to long term leases may find that continuing liability, under the rules relating to privity of contract, will rebound on their balance sheets. It is anomalous that the grocery trade operators are obliged to take long leases so as to ensure that potential assignees will be able to finance the purchase, while other national multiples, such as Associated British Foods, Boots and GUS, can renew marginal premises in 5 year tranches only so as to limit their liability in the event of assignment. It is now time for financial institutions to have a re-think otherwise they will create bankruptcies as a direct result of their own rigid lending policies.]]>help@michaellever.co.ukSecondary ShopsRentNewsletter1984-06-01T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1984#unique-entry-id-90http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1984#unique-entry-id-90
The objective is to keep in touch with Clients (and legal advisers) on a regular basis and to offer a commentary designed to stimulate and keep you informed of the latest developments. A quarterly commentary inevitably suffers the disadvantage that ideas can be quickly out of date so I shall not be imitating the style of others. Large agencies issue periodic reports on market trends, but most seem to concentrate upon the top end of the market and the recent discovery by Hillier Parker May & Rowden that secondary shop rents have increased at a rate of 9.2% per annum since 1979 simply enhances many people’s awareness that the larger agencies, and the property media, are addicted to prime. It is common knowledge that only relatively few advisers really understand secondary property, despite the fact that it constitutes at least 90% of the market.



]]>help@michaellever.co.ukProperty CostsRent ReviewNewsletter1999-06-01T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1999#unique-entry-id-89http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1999#unique-entry-id-89
Even so, many tenants lose out because “win-win” has become institutionalised amongst surveyors so that, instead of concentrating on reduction, the emphasis is on agreeing market rent. Whilst the guidelines are geared towards that objective, the interests of landlord and tenant are opposed so, assuming an upward-only review, rather than reducing the proposal, I focus on passing rent. Clients also benefit indirectly in that their premises become more marketable, because when I release information for comparable evidence, landlord and surveyor opponents elsewhere invariably discount the devaluation. For example, I concluded a March 1999 review in Cornmarket, Oxford at under £180 Zone-A when Gap, almost next door, paid over £204 headline Zone-A in July 1998 and Birthdays nearby agreed 15% more on review in September 1998. Similarly, in North End, Croydon, I negotiated a March 1998 renewal at £125 Zone-A when, almost next door, an independent expert determined Zone-A £140 at the same date.

I am often instructed as a trouble-shooter and, in such cases, am fascinated by what the parties have taken for granted. If my experience reflects the market as a whole, then scope for further reducing property costs could be enormous. For example, many surveyors have difficulty in carrying out their instructions because of conflict between truth and bluff. To compensate, they can throw their weight around but, to retain peace of mind, sabotage the result. For example, I was embroiled with a surveyor whose stance was ‘take-it-or-leave-it’. He insisted that I should agree his floor areas because they were agreed on earlier occasions with chartered surveyors. On my calculations, verified afterwards by another surveyor not previously involved, the landlord’s surveyor’s area was wrong and the rent ,£4000 a year too low. In another matter, a landlord has been asserting the right to review after 3 years delay and, legally, was right. However, I resisted so, after a year or so getting nowhere with me, the landlord instructed a surveyor who told me that, whilst he agreed with my contention that the right had been lost, it would be a gesture to pay more - because that would be “fair”.

Apart from finding angles, I am good at reading between the lines and listening to what is not said. Concerned about the effect on the investment, landlords can be human although, in prime positions, resemblance is unusual, so one must be careful not to be emotional or mention their desire to recoup losses from pension mis-selling. Some landlords need cash flow, others scared of voids, and many surveyors have fee targets so agreement takes priority over doing their best for clients. Also, I have no duty to protect retailers for whom I am not acting, so it may be possible to achieve a good deal for my Client that would support an increase on rent for a neighbouring retailer and, if in competition with my Client, then even better!

Reading between the lines is easier now that the standard of literacy amongst surveyors has fallen. I regard anyone who spells its as it’s, in the context of its, as a sitting duck for a referral by written submission. But, because I dislike spending Client’s money, I prefer to serve by using technical skills and psychology constructively. In short, if you would like to pay less than the going rate, then I look forward to helping you in some way. Thank you. ]]>help@michaellever.co.ukLandlordInvestmentAuctionGeared ReviewRent ReviewDispute ResolutionArbitrationGround LeaseUnderlease1998-10-13T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1998#unique-entry-id-82http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/1998#unique-entry-id-82The property comprises a 52,000 sqft store occupied by New Look.

My Client, the superior Landlord, owns the freehold of the front section of the property, a ground lease for a term of 999 years of the back section and 99-year lease of the middle section. The middle section is built on a raft over the railway tracks and the rent for that section is a percentage of the entire property. My Client leases the whole property to Powis Street Estates which in turns sub-lets to New Look.

The 99-year lease has rent reviews every 21 years and the lease between my Client and Powis Street Estates also contains rent reviews at 21 year intervals.
For the 1995 rent review, when the store was let to Littlewoods, the review was referred to arbitration, the arbitrator was a senior partner of Jones Lang LaSalle. Littlewoods was represented by a partner of Healey & Baker (now Cushman & Wakefield). In our respective submissions, we considered the rents of stores throughout Greater London. The Award was at almost the same rent as I had originally proposed.
For the 99-year lease review, where my landlord-Client is the tenant, other issues were involved reflecting differences in the leases. To minimise the proposed increase in rent, I research the development history of the building including obtaining copy documents from the solicitors that had acted for the original landlord in 1974. During the negotiations, legal proceedings were initiated against the superior landlord’s surveyor for breach of warranty of authority.
]]>help@michaellever.co.ukLandlord Rent ReviewUpward/Downward Review2008-09-29T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2008#unique-entry-id-66http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2008#unique-entry-id-66Acting for a Landlord, I negotiated 10% increase at September 2008 rent review in a lease which has an upward or downwards rent review clause. ]]>help@michaellever.co.ukRent ReviewTenantDispute ResolutionCalderbankIndependent ExpertCosts2011-03-25T00:00:00+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-64http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-64
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; Zone a £127.50. The landlord paid all costs of the Independent Expert.
]]>help@michaellever.co.ukRent ReviewCostsIndependent ExpertDispute Resolution2011-10-01T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-44http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-44Acting for a retailer in Cheylesmore, Coventry, I arranged referral of a rent review at 1-2 Quinton Parade to an independent expert and the revised rent was determined accordingly.

The Lease requires the tenant to pay all costs of the determination (the expert's fees) if the determination were within 10% of the landlord's proposal, so the expert took it upon himself to determine my Client should pay all costs. However, what the expert overlooked was a) the proposal was that which had been made at the date of the application to the RICS for the appointment of the expert and b) the expert's role in the procedure did not extend to responsibility for costs. At the date of my application to the RICS, the landlord had not proposed any rent so I reasoned the provision for costs did not apply. Also, I reasoned that apportioning responsibility for costs was a separate issue which was nothing whatsoever to do with the expert. It was an arrangement the parties had agreed would apply after the determination were released and not part of the actual determination process. 

Needless to say, the landlord's surveyor did not agree but, because I stuck to my guns the expert found himself in an invidious position, so the landlord said he would obtain legal opinion. Whilst waiting for the lawyers, the landlord's surveyor sent me a memorandum for my Client to sign to  confirm the new rent. I obtained my Client's signature but did not return the Memorandum to the landlord's surveyor for completion; instead I said that because the expert's determination on costs was included in the determination the entire determination was invalid pending resolution of the costs issue.  I emphasised that whereas I was not going to recommend the revised rent should not be agreed, I did not think it should be payable until after the issue of costs was finally disposed of, so if the landlord's legal opinion did not agree with my opinion, I should arrange for my Client's solicitors to apply to the Court for a declaration. However, without prejudice, I offered to advise my Client to return the Memorandum for completion and pay the rent without further ado if the landlord would agree to pay half the expert's costs. The landlord realising the matter could take months to resolve, not to mention mounting legal costs, capitulated.]]>help@michaellever.co.ukRent ReviewTenantDispute ResolutionRestructuring2009-07-16T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-41http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-41Acting 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. (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. The past catches up!) 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 a 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.]]>help@michaellever.co.ukInvestmentBreak ClauseLawRepairVacant Possession2011-06-24T19:22:47+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-27http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-27Per NYK Logistics (UK) Ltd v Ibrend Estates BV [2011] the Court of Appeal has held that a tenant failed to give vacant possession pursuance to the terms of the break clause in its lease.

The tenant did not have to carry out repairs as a condition of the exercise of the break clause, but wanted to do them to control costs and quality and avoid a dilapidations claim for damages in excess of its own costs in doing the repairs. The tenant had not finished its repairs by the break date. Although the tenant had tried to contact the landlord to agree an extension of time to continue the repairs, the landlord had failed to respond. Workmen (employed by the tenant) remained in the property following the break date to finish off the outstanding repairs. The tenant also continued to employ a security guard for a further week following the break date because of concerns that the property would be vandalised.

The Court of Appeal held that the tenant should have moved everyone out of the property by midnight on the break date, including its security guard. The tenant should have contacted the landlord's agent on the break date to explain it was vacating and agreed to deliver the keys that same day. The tenant could then have contacted the landlord on the next working day and asked the landlord whether it would permit the tenant to return to the property, as its licensee, to complete the outstanding works. The tenant also failed on its subsidiary argument that the landlord had waived performance of the requirement to provide vacant possession.
]]>help@michaellever.co.ukInvestmentValuationLaw2011-06-21T14:16:55+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-26http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-26 Scullion v Bank of Scotland plc (t/a Colleys) [2011] the Court of Appeal has overturned the High Court decision that for buy-to-let residential property the valuer was liable to the purchaser.

The CA held that although the valuer had been negligent and the purchaser had relied upon the valuer’s report (amongst other advice) when deciding to proceed, the purchaser did not establish foreseeability of damage or a sufficient degree of proximity between himself and the valuer.
Nor did the purchaser show that it would be "fair, just and reasonable" to impose (on the valuer) a duty of care to the purchaser. The Court held there were important distinctions to be made between valuations for buy-to-let purposes and those made for home buyers.

The court commented that those buying properties to let, were less "deserving of protection by the common law against the risk of negligence than those buying to occupy as their residence."

]]>help@michaellever.co.ukNewsInvestment2011-06-01T09:42:57+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-24http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-24English Heritage has created a searchable database of all nationally designated heritage assets including Listed Buildings, Scheduled Monuments, Registered Parks and Gardens, Registered Battlefields and Protected Wreck Sites.

http://list.english-heritage.org.uk/]]>help@michaellever.co.ukNewsInvestment2011-05-26T00:00:00+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-23http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-23Commencing 26 May 2011, all UK businesses and organisations running websites in the UK are required by law to obtain people’s consent before they install cookies on their machines. (A cookie is a line of code that enables websites to monitor visitor usage, etc: it does not identify the actual user.)

None of the websites that I run and maintain install cookies, but the company whose services I use to monitor usage does install cookies. I am checking the legality of that as far my responsibility is concerned. Frankly I think cookies are an invasion of privacy although I accept they are necessary in some matters so if it transpires that I need to obtain your consent then I shall end the arrangement with the monitoring company.
]]>help@michaellever.co.ukRent ReviewDispute Resolution2011-02-25T12:45:20+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-22http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-22I have become so fed up with chartered surveyors paying ‘lip service’ to the RICS Practise Statement and guidance Notes for chartered surveyors acting as expert witness at rent review but ignoring the substantive provisions that I am going to make formal complaints to the President of the RICS.


In one case recently, the tenant’s expert witness surveyor, apparently on the RICS panel, failed to disclose that he and his firm are retained advisers for the tenant. The expert witness opinion was partisan and when challenged he said he was not answerable to me. Fair enough, but he is answerable to the RICS and being on RICS panel for dispute resolution appointed surveyors has a duty to set a good example.

In another matter at present, where I’m acting for the tenant, the landlord’s surveyor now acting as expert witness, quite apart from describing his report as a submission, thereby confirming ignorance of terminology, is basically arguing the matter as if an advocate.



]]>help@michaellever.co.ukInvestmentRetailers2011-01-13T16:43:24+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-20http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-20In the context of shop property for investment, the financial standing of a tenant can affect investment performance.

Although property costs (rent, business rates, etc) are often blamed, in practice, in my opinion, the majority of problems that befall retailers are self-inflicted through failure to address operational difficulties. Difficulties also arise where the trading location has improved, but the nature of the tenant’s business is out of kilter. Conversely, the trading position may have deteriorated, but the retailer’s mode of business, particularly on pricing, is not commensurate.

Where trading difficulties are caused by external events over which a retailer has no apparent control, such as severe weather conditions, the state of the economy, recession, and so on, such events are often cited as the cause of profit deterioration, but the fact that other retailers operating in the same sector of the market may be doing well, despite the same ostensibly adverse conditions, makes me think that ‘blaming’ such external events is used as an excuse for the retailer’s own shortcomings.

The challenge, in times of change, as indeed at all times, is to always remain in sync with what customers want to buy. There are many reasons for being out of sync, for example:

• The retailer is not providing as good a service as it thinks
• The retailer is offering what it wants customers to want: not what people need.
• Directors have lost interest - particular common if just short of retirement age, or having made a pile cannot really be bothered!
• Directors are disillusioned - a feeling that indicates lack of sync with reality.
• The business is failing to deliver what it promises.
• The retailer’s staff have the wrong attitude for the customers in the reality that the business serves.
• There is insufficient demand or too much competition to run a profitable business.
• Cash-flow is poor and other business management skills are lacking.
• The business is not professional and forward-thinking in its outlook.
• The directors are more interested in helping themselves than helping others.
• The directors are not doing what is essentially true for them.

Although many retailers come unstuck in time of change, in practice it is not difficult to avoid that scenario. The main obstacle is that many retailers are resistant to change and will only do so when it is forced upon them, by which time it might be too late. ]]>help@michaellever.co.ukInterest RatesInvestment2011-02-25T12:45:14+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-19http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-19Interest Rates

Base Rate remains at 0.5% since 26 October 2009


For MLR and Base Rate changes since 1989, please click here.]]>help@michaellever.co.ukLettingInvestmentLease RenewalLaw2010-10-03T17:57:47+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2010#unique-entry-id-17http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2010#unique-entry-id-17The latest in my series of ML Guides is now available, a summary of the information required for Lease Plans.

Please note a lease plan is not required if the tenancy is shorter than 7 years. To reduce the expense of getting a compliant plan on grant of a new lease or on renewal, it may pay to have a shorter term than 7 years. However, specific advice must be taken, since there are wider consequences to consider. ]]>help@michaellever.co.ukRent ReviewDispute ResolutionRICS DRS fee2009-10-27T09:18:51+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-13http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-13Dispute resolution costs and fees

In my opinion, and I'm not alone, the fees required and charged by surveyors appointed by the RICS to act as arbitrators or independent experts are often out of touch with reality and, in many instances, obscene.

For example, I am dealing with two matters at present, for different clients, where the rents are likely to end up at around £14,500 pa. In each case, the independent expert wants to charge around £250-£300 an hour, with a minimum fee of £3500 + disbursements and VAT. Now if the agency side of the firms of which those experts are partners were instructed to let the property then chances are the commission would be 10% of the first year's rent (ignoring any rent-free) subject to a minimum commission of £2000 plus VAT. 

In another case, the appointed independent expert's hourly rate is £200 an hour + disbursements and VAT. Okay, maybe that's par for the course (or at least it used to be), but the surveyor has run up a bill of almost £1000 + VAT, etc just on dealing with preliminary communications. Also, at a different office of same company, where another person has been appointed, the charge is (only) £175 an hour which, considering it's the same administrative structure, suggests to me some sort of target approach to revenue. 

I don't know where such people think the money comes from to pay their fees but frankly if that's the way they carry on then it's hardly surprising so many surveyors are experiencing financial difficulties and having to lay off staff, etc. 

It's always been the case that where the parties have no choice the adviser will charge as much as they possibly can. You get that with legal costs and surveyor's fees in connection with tenant applications for licences to assign, sub-let, do alterations, and with schedules of dilapidations. I think the same principle is being applied at review referrals. Once appointed, the surveyor has a general duty to proceed and although that can be stopped by agreement the parties have little or no control over how much the surveyor will charge. 

Personally, and I've said this all along, I think there should be a fixed fee, possibly on a sliding scale according to the level of passing rent, (with adjustment if the passing rent is a ground rent, for example), for independent expert determinations and arbitrator awards at rent review. The old argument  it's impossible to know what will be involved doesn't hold water. When I take on a rent review for a client, I don't have the luxury of  being able to charge whatever I like: I quote a fee at the start and no matter how long the job takes or what's involved, I stick to what has been agreed and no more. 

An open-ended  'blank cheque' approach exposes both landlord and tenant to the risk of having to pay a disproportionate amount to a third party, which let's face it, particularly with an independent expert, expects most  of the job done for them.

The advantage of a fixed fee is that you know where you are the start. You can tell the client it would cost 'x' to go to referral and that would be it. At present, I can only estimate and having to say that the total costs could be in the region of £3000-£5000 + VAT, etc is a really frightening amount for most people, even if their share would only amount to half of that. 

Under the existing system whereby surveyors can charge whatever they like, I think landlords and tenants are being taken for a ride. 

PS - I am in the process of setting up a low cost dispute resolution service where, for example, I am likely to charge in the region of £1750 + VAT for expert determination and maybe the same for arbitration. The full fee would, of course, not be payable in the event the matter were settled beforehand. ]]>help@michaellever.co.ukRent ReviewRICS DRS feeDispute Resolution2011-02-25T12:45:34+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-12http://www.michaellever.co.uk/therentreviewspecialist/newsandviews.html#unique-entry-id-12RICS dispute resolution application fee
With effect from 4 January 2011, the application fee payable to the RICS is £369.00 (inclusive of VAT at 20%)
Previously:

2000 April  -  £275 inclusive of VAT
2002 August - £300 inclusive of VAT 
2006 June  - £320 inclusive of VAT
2008 April  - £340.00 inclusive VAT
2009 April 15 - £333 inclusive of VAT (15%)
2009 June 15 - £353 inclusive of VAT
2010 to 3 January 2011 - £361.00 inclusive of VAT (17.5%)
2011 January 4 - £369 inclusive of VAT (20%)


]]>help@michaellever.co.ukLease RenewalSub-lease2009-09-01T15:40:49+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-8http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-8Sub-lease implications

Multiple retailers, particularly, with premises that are surplus to requirements frequently sub-let, rather than assign the leases. Why? There are many reasons. For example:

1) the risk of assignment is that in the event of assignee default, the lease could revert to the assignor at any time. [Although leases containing Authorised Guarantee Agreements only revert to the assignor in the event of assignee default, older leases are subject to the original rules of privity of contract, so would revert to the original tenant, regardless of how many assignments have taken place, and with the assignor having no rights to reoccupy the premises.] 

2) The financial standing of the assignee might not satisfy the freeholder's criteria. 

3) Once assigned, it would not normally be possible for the assignor to take the premises back were the assignor to want to re-occupy the premises in future. 

4) Any use to which an assignee or future assignee might put the premises could, assuming no restriction in the lease, risk creating a competitor for the assignor's business in the locality. 

On balance, sub-letting is an opportunity to charge a profit rent, and enables the tenant to keep control of the lease. The risk of sub-tenant default or delay in paying the rent still exists, but the tenant would control what to do, rather than the landlord.

Generally, where a lease allows the tenant to sub-let, the required outline terms and conditions of any underlease are stated in the lease. Although modern leases may require any under-lease to be outside the Landlord and Tenant Act 1954, often older leases do not. That means that provided the under-lease would qualify for renewal rights on expiry, and assuming the under-lessee wants to renew and the superior landlord does not oppose renewal, the under-lessee would become the direct tenant of the superior landlord. 

Regardless of the conditions required by the lease, on grant of under-lease, it is not unusual for strictures of full repairing and decorating obligations to be eased by a schedule of condition or similar. In such cases, the under-lessee should be aware that, unless the underlease is worded correctly, the commercial value of a schedule of condition will end on expiry of the contractual term of underlease, and not continue into any statutory continuation or holding over period.  Furthermore, provided the under-lessee is in occupation of the premises on expiry, (and the superior landlord does not oppose renewal, and renewal rights are protected), it should be possible for the terms and conditions of the underlease to be reflected in the terms and conditions of the renewal lease. So, the renewal lease could also contain a schedule of condition. 

The risk/cost of managing surplus estate and onerous leases can mount up to become a noticeable provision on the balance-sheet, so retailers like to be rid of the commitment by assigning them, either to third parties, or more likely to their under-lessees. Where an under-lease contains a schedule of condition, the lessor/assignor will normally agree to indemnify the under-lessee for the cost of compliance with the difference between the full repairing covenant and the schedule of condition so that, in practice,  the underlesee/to-be-assignee is in no worse a position. 

However, unless careful consideration is given to the long-term and wider consequences, the position could be a lot worse. The under-lessee should ensure the indemnity covers any statutory continuation or holding over period of the lease. Also, the under-lessee should note that, on expiry and renewal, it would be the terms and conditions of the lease (assigned) that form the basis for the valuation aspects of s.34 and s.35 Landlord and Tenant Act 1954, and not the terms and conditions of the underlease. In other words, by taking over the lease, the under-lessee would be losing the right to renew on the same terms and conditions of the underlease, the schedule of condition not carried forward. 

The total cost of putting a property in a state of repair and decoration as envisaged by the lease can be considerable. It is not only the actual expense for the works but also the attendant costs and fees payable to lawyers and surveyors for the landlord, as well as the tenant's advisers. 

]]>help@michaellever.co.ukInvestmentPre-packAdministration2009-03-01T15:39:23+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-7http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-7My letter published in Estates Gazette, March 2009:
"Whilst I agree with Anthony Ratclliffe there seems precious little difference between “phoenix” company and “pre-packs”, I do think landlords could do both themselves and the shop property sector a service by adopting a more robust approach to requests for assignment.

Generally, alienation criteria in a lease enable a landlord to require a director surety or guarantor as a pre-requisite for consent for assignment. Generally, multiple retailers are unwilling to provide personal guarantors but, since the pre-pack company is effectively a new business with no trading record, there is no reason to treat it any differently.

In my opinion, landlords are being presented with a rare possibly unique opportunity to influence the future of retailing and the structure of property costs in the UK. By refusing consent to assign to a pre-pack unless personal guarantor(s) are provided, multiple retailers are less likely to embark upon debt-fuelled jamborees, if their own personal money were on the line. One reason there is now a legacy of high rents in most places is not a consequence of supply and demand, so much as the knock-on effect of rental evidence caused overambitious egocentric retailers living off borrowings and overpaying for new lettings with no thought for the long-term wider consequences.

Increasingly, I am taking the view that comparable evidence at rent review involving a transaction where the lease is to a company without a personal guarantor should be treated with the utmost caution, because the rent is likely to be higher.

In my opinion, multiple retailers allowing branches to under-perform, such that they have to be ditched using pre-packaged practices, is tantamount to gross incompetence at the highest level. It is also a poor reflection on the investment acumen of innumerable landlords in allowing multiple retailers to be exempt or shielded from the strictures of tenancy management that are automatically applied to small businesses."

]]>help@michaellever.co.ukInvestment2009-10-01T15:38:49+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-6http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-6"Distressed" seller is the latest way for sellers to get rid of rubbish. The sort of properties that nobody else would buy. Start off by putting on the market over-priced. Expect to sell for much less. Attract interest, consider offers much lower than the quoting price. Do some due diligence as to whether the buyer has the money. Agree to accept what is thought by the buyer to be a bargain price. Exchange and complete contracts as soon as possible. Everyone is happy.  
]]>help@michaellever.co.ukInvestmentSale and Leaseback2009-09-01T15:38:16+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-5http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-5It seems to me there are a growing number of people thinking to themselves now seems like a good time to invest in shop property. But I'm not convinced. Not because life's difficult for many retailers, and that for many struggling on in the hope of surviving is possibly about the best they can do, but that that the sort of property on the market for sale doesn't fill me with much enthusiasm for its investment potential.

Unlike the stock market, where you're buying a share of the company's business, with property you are not. You are simply buying the building in or which which the tenant runs its business. Whether the tenant intends to remain there is not something you are entitled to know and the tenant is not obliged to keep you informed. The only time the tenant has to tell you it is going is when it applies to assign the lease, sub-let the property, or does not renew the lease on expiry. And/or, in the case of a ltd company or plc, when it puts the occupant tenant in liquidation, administration or a CVA. Therefore, when you buy a shop property investment, you are placing a good deal of trust on the fact the tenant will continue to be the tenant for at least as long as the price you pay is commensurate with the value you have placed on the property per that price you have paid. For example, if the price you pay equates to 7% yield then to maintain that value, all other factors remaining constant,  the tenant or a tenant of at least the calibre (if the lease were assigned and/or the property re-let) would have to remain the tenant for just over 14 years. If not, if any future tenant within that 14 year period is of a lesser calibre, then the value of the property would be less (all other factors remaining constant). 

Buying a property let on 20 year lease is not the answer. Generally, retail property is a depreciating asset and the shorter the term the greater the yield. A property let to Barclays Bank plc, for example, on leaseback for 20 years from 2009 will likely fetch a higher price than if the term remaining is only a few years before expiry. 

There is a difference between the return or yield you can get based on what you pay and whether the investment is worth buying in the first place. I think many people are not realising they are falling into the trap of the first. And it is a trap, believe me, because what it leads to is becoming stuck with something that is really only resalable at the same sort of price now. ]]>help@michaellever.co.ukRent ReviewInvestmentMonthly RentsRentLandlordTenant2009-09-01T15:36:18+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-3http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-3Monthly Rents

Although retailers in trouble are managing to persuade landlords to accept rents paid monthly, a growing number of retailers that are not in any difficulty are expecting the same treatment.

Some landlords can afford to be accommodating, but many cannot. Landlords that themselves are borrowing money are likely to be paying their interest quarterly, so accepting rents monthly from the tenant will mean the landlord subsidising the tenant. 

In any event, such an arrangement, where it is a departure from the terms and conditions of the lease, should only be temporary, and subject to notice to end the arrangement if the landlord should so desire. Landlords should also put the agreement in writing, in a side-letter with the lease, setting out clearly the terms and conditions of the arrangement. 

To avoid problems should the landlord want to sell the investment, the arrangement should be personal to the tenant and landlord and non-transferable. 

In my opinion, the investment value of a property where the tenant is being allowed to pay monthly could well be lower than where payments are quarterly. 
]]>help@michaellever.co.ukRent ReviewInvestmentUse Class A52009-10-26T15:35:41+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-2http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-2Take-away food shops planning restrictions

LB Waltham Forest has introduced a policy, likely to be copied by other planning authorities, of not allowing take-away food shops to open within 400 metres of schools, parks and youth centres. Also, the North East London planning authority has begun consulting on a suite of development control policies which would restrict the number of fast-food outlets within primary, secondary and retail parade zones.

Until the 400-metre rule becomes nationally adopted planning policy, the point would only arise within LB Waltham Forest. In the meantime, to prepare for the possibility!

At rent review in the lease of premises whereby the permitted user is take-away foods - Use Class A5 is hot food takeaway, and possibly A3 - an assumption of the hypothetical tenant being able to get planning permission for such use is normal. If the premises are within 400 metres of a school, park and youth-centre, then in the open market the assumption would fail in practice. That could have the effect of either increasing the market rent, on the basis that if the premises did not already have take-away use then it would not be allowed, in which case there is a scarcity value, or reducing the market rent on the basis that in the market such planning use would not be allowed. 

At lease expiry, if the tenant requires a lower rent or it will not renew, the landlord will have to weigh up the consequences of conceding a lower rent against the risk not being able to re-let the premises for take-away use if the planning permission for such use were to elapse. 

There are thousands of take-away food shops. As literal interpretation of the lease has given way to presumption in favour of reality, checking the distance to the nearest school, park and youth-centre will be necessary when evaluating the rent. 


 
]]>help@michaellever.co.ukRent ReviewNews2009-05-21T18:30:43+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-1http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-13CPD, a registered charity www.3cpd.co.uk invited me to give a talk about "Rent Review in the Prevailing Climate”. Open to non-members, approximately 30 people attended the event, which took place on 21 May 2009 at a venue in Oxford. ]]>help@michaellever.co.ukRent Review2009-10-26T15:33:27+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-0http://www.michaellever.co.uk/therentreviewspecialist/newsandviews_files/2009#unique-entry-id-0Upwards or downward - rent review
Many tenants, and I should imagine landlords also, probably think that where a rent review is 'upward' or 'downward' so that the rent payable after the review could be less than before, the rent is likely to go down, in the prevailing economic climate. 

That may not be so. For a landlord, for whom I have acted for years, I recently negotiated a 10% increase in rent for a September 2008 review even though the lease contains a downward provision. 

The important thing to remember is that rents are not based on what the actual tenant could afford or the actual landlord might want, but upon comparison. Where the evidence is of rents whose reviews are upward-only, a nil increase (which, as I have said before, is no evidence of a lower rent) does not mean rents have fallen. Also, it is not only another rent (pro-rata) to which a review is compared, but also the terms of the lease. When you make a comparison between an upward only review clause and an upward/downwards clause, it is reasonable to assume a tenant would be attracted by the prospect of a lease containing upward/downward clause and paying a greater rent for the premises than if the review were upward only. 

So, if all the evidence is nil increase, which as I've said does not mean the rent has gone down, then in the absence of proof that rents have indeed fallen, the advantage of having an upward/downward review has a value. Which in this case I agreed at 10% more.]]>