Home | Controlling property costs

Controlling property costs

19 March 2008

Occupying commercial premises is a necessary evil for most retailers but there are some tactics which, if deployed, could add up to some substantial cost savings.

Firstly, try to capitalise on potential rent savings in volatile markets; second, look to release funds from the portfolio; finally, make sure that service charges are kept in
check. These are the key points:

• Where rents are hiking upwards, consider rental valuation at least 6 months in advance of lease expiry. Approach your landlord to agree the new rent as early as possible and avoid being tied to a higher rent due to delay in getting the deal done. Push for early resolution, via formal Court procedure if necessary. Where rents are falling, make sure that you are in a position to claim a refund from lease expiry onwards by using the 1954 Act statutory notice procedures at least 6 months before the lease expires to enforce this entitlement.
• Look at re-gears, downsizing, and sale and leaseback deals – work with landlords to get maximum benefit for them and you.
• Review your service charge accounts - make sure that the lease allows your landlord to charge for the categories it does, and that the levels are fair.

Large property portfolios always have surplus sub-let units, whether in whole or in part. Here, two important areas can be looked at:

• Control of sub-tenant breaches - act early to avoid sub-tenant arrears problems escalating, keep accurate records of accounts, all conversations and correspondence, and consider issuing statutory demands to force a quick settlement.
• Maximise rental income from sub-lets of part – look at markets with rising rents and don’t delay in using the statutory notice procedure to your advantage to ensure that in the interim, the new higher rent will apply – but don’t push to get the deal done, as the longer you leave it to fix the new rent, the higher the market might climb. The tenant may have the comfort of a discount on the rent for the interim period, but the circumstances when tenants are entitled to this are rare. In falling markets, do the opposite – don’t rock the boat. The longer the old lease continues at higher than market rent the better.

The indications are that the market will bounce back from its current subdued state and that the fears may be unfounded - but cost control never goes out of fashion.

---

Are any of the issues in this article giving you a headache? If so, we want to know

Name *
Email *
Telephone
Comments*
I agree to Shoosmiths holding information about me in accordance with its privacy policy.* To subscribe to our news updates click here.

 

Email this page

Search the site

Enter the keywords below to search:

Related links

• Property
• Retail

Get in touch

Libby Shirtcliffe

Partner
T: 08700 86 5080
I: +44 (0)115 906 5080
E: libby.shirtcliffe@shoosmiths.co.uk