Press Release
09 January 2009
Landlords should consider accepting monthly rents advises McGrigors
National law firm McGrigors LLP is advising commercial property landlords to seriously consider requests to pay rent monthly, in order to protect their leases. While requests for monthly rent have traditionally been perceived as an act of desperation, McGrigors says that landlords must recognise that the traditional market has changed beyond recognition and that monthly rents are no longer something to be avoided at all costs.
Major retailers such as House of Fraser are already negotiating for monthly rents which landlords should view as an indicator that in the current economic climate, monthly rents are set to become standard industry practice.
Leslie-Anne Faichnie a senior solicitor in McGrigors’ real estate practice, said: "Monthly rental agreements can guarantee that tenants have a steadier flow of cash. Ultimately, this could mean the difference between a tenant being able to continue paying their rent and having to forfeit the lease. We are convinced that monthly rent will soon be regular practice in the industry so we are urging landlords to accept this new reality quickly, before tenants go bust and they are faced with all the problems associated with having an insolvent client in their property."
"What’s also important to remember is that rental agreements can be restructured for short-term benefit and switched back to quarterly arrangements when both parties are comfortable."
However, McGrigors is urging landlords not to enter into monthly rent agreements on an informal basis. Any changes should be carried out in the same way as any rent review would be. It is particularly important that a landlord's lender is included in the plans to make changes to how rent is charged.
Leslie-Anne Faichnie says: "All parties, including lenders, must be fully informed and happy with any restructuring. All arrangements must be legally documented and in accordance with the landlords’ current banking agreements. If the landlord does not obtain its lender's consent to any change, the landlord could find that it has broken its lending terms and the lender could be entitled to call up all of the landlord's current debts."
Lesley-Anne believes that while increased flexibility in lease terms will benefit all parties in the current market, communication between all parties is key. She said: "Effective businesses respond to customer needs and economic change and, while there is no such thing as a truly flexible lease, it is simply a written contract, so all that is really required is flexible tenants, flexible landlords and, dare I say it, flexible funders. "
Andy Peat
Business Development Director
Telephone: +44 (0)20 7054 2710
Mobile: +44 (0)7894 835 386
Email: andy.peat@mcgrigors.com
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