a ~17~V~r // * 1 rket a TRANSPORT P~ ~~ fr~6GI~ ~ N f~TRucruaf - - PowerPoint PPT Presentation

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a ~17~V~r // * 1 rket a TRANSPORT P~ ~~ fr~6GI~ ~ N f~TRucruaf - - PowerPoint PPT Presentation

~~ ` ~ . i . ~ i / \~~ ~ ~~` ' ' ' ,, r ~ f , , ~~ ~ 1~~ / ~~ 1 ~' ~~~~ Retailers '~ r r ` y ~~/ i n ases a ~17~V~r // * 1 rket a TRANSPORT P~ ~~ fr~6GI~ ~ N f~TRucruaf . ~ *~** . .~ ~ ~~ RED l '~


slide-1
SLIDE 1

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slide-2
SLIDE 2

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slide-3
SLIDE 3

Modernisation

  • "As

per the

existing lease

but subject

to

reasonable modernisation"

  • What

does

this mean?

  • What

guidance

has

the Court given

as

to

"reasonable modernisation"?

  • What
  • ther

guidance/strategy

can be used

to

secure

favourable

terms?

.:.~

.,

slide-4
SLIDE 4

Term

Commencement

  • On

the

coming

to

the

end

  • f

the

current tenancy.

Length

Maximum

term

  • f

15

years

  • therwise

term must

be

"reasonable

in all

the circumstances".

  • Difficulty Landlord may

face

in re-letting the

Property

  • Length
  • f

current

tenancy

Tenant's continued 1954

Act

protection

  • Rental market

as a

whole and

possibility of falling rents

  • Landlord's

and

Tenant's plans

for

the Property

Limited evidence that

Tenants

forced to take longer leases than they

wanted

slide-5
SLIDE 5

Term

Iceland

v Castlebrook (2013) Tenant

  • Needed

flexibility

  • Store

was

underperForming

and

in a

poor

location

  • Market

conditions

were

unsettled

Landlord

  • Short

term would adversely

affect

its reversionary

interest

  • Supermarket

leases

were

normally granted

for

longer

terms

Judge

  • Accepted

the Property

was

dated

with a limited life and market

  • Landlord produced poor

evidence

  • Tenant's

national trading performance

  • Ordered

a 10

year term

with no

break

slide-6
SLIDE 6

Tenant Break

Option

  • Limited Case

Law

  • Company

Policy

not

an

acceptable reason

for

a

break

  • Relocation must

be "on

the cards"

  • r

a

"real possibility"

SL. h ..5
slide-7
SLIDE 7

O'May

  • v-

City

  • f

London

Real

Property

Company

Limited

(1983)

In considering

the

terms

  • f

a

renewal lease

the

Court

must "have

regard

to

the

terms

  • f

the current

tenancy

and

to

all

relevant

circumstances"

  • Existing lease

not

petrified

  • It is

for

the

party

seeking

to

depart from the

current

lease

terms

that

must

show

that

the

change

is reasonable

and

fair

  • Can

the

  • ther

party

be compensated

for that

change.

} ~:

slide-8
SLIDE 8

Other terms

Alienation

  • Landlord

and Tenant (Covenants)

Act

1995

Authorised Guarantee

Agreements

  • Pre-emption

Rights

Guarantors

Existing guarantors

New

guarantors

slide-9
SLIDE 9

Other terms

contd.....

User

  • Widening
  • f

user clause

unlikely to be

accepted

  • New

restrictions

  • n

user

  • Keep

Open

  • Competition Law

Martin Retail

—v-

Crawley

Borough

Council (2013)

  • Landlord

looking to

impose

prohibition against

convenience

store

use

to protect

nearby convenience

store

  • Tenant

looking to

widen user

to allow

convenience

store

use

  • Court

held Landlord's

proposed

restriction anti-competitive

and

allowed the

Tenant

to

widen

its user

clause

  • n

basis

Tenant agreed

to pay additional rent

slide-10
SLIDE 10

Other terms

contd.....

Repair

Responsibility for structure (short

—v- long lease)

  • Landlord's

right

to self-help

  • Property

already

  • ut
  • f

repair

Alterations

  • Centre

standard Service

Charge

Repair

and maintenance

  • f

the

Building

  • Soft

services

Costs

slide-11
SLIDE 11

Other terms

contd.....

  • Rent

review

  • Party

looking to

depart from the

existing lease

must

prove

that

change

is fair

and

reasonable

  • Compensated

by

increase/decrease

in the

rent

  • Market

norm

  • Estate Management
slide-12
SLIDE 12

Other Tools

available

to

Retailers

Code

for

Leasing Business Premises (2007)

  • Industry

sanctioned

collaboration between

advisors

to

Landlords

and

Tenants

  • Checklist

for New

Lease and Renewals as

to

what

is "fair

and

reasonable"

  • Lip

Service

to

date but worth

considering:

  • Impact
  • n

value

  • Disputes
  • Threat
  • f

Legislative Change

slide-13
SLIDE 13

Other Tools

available

to

Retailers

contd.....

The RICS Code

  • f

Conduct

in Commercial

Service

Charges

  • "best

practice"

all regulated practitioners

should have regard

to

the

Code

  • Modernise

service

charge

  • n

renewal

  • Adjustments

should be

made

to

the

rent

  • Interaction with O'May

Green Leases

  • Court

sympathetic

to

removing

barriers to

environmental

improvements

  • Increasing burden
  • n
  • ccupiers

either

through

direct

  • bligations
  • r

service

charge

.~:~

~'
  • ~'.1
slide-14
SLIDE 14

Strategy

  • Consider

your

existing Lease to understand how

the

terms

sit with your

current

  • ccupational

requirements

  • Avoid

agreeing the term

and

rent without

first discussing

principles

  • f

modernisation

Consider

the impact

  • f

a

"Landlord

friendly"

Lease

  • n

rental

value

Use

  • f

model

sets

  • f

heads

  • f

terms

~~:

slide-15
SLIDE 15

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slide-16
SLIDE 16

J

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Lease Renewals

Mark

Barley

14 May 2015

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slide-17
SLIDE 17

Introduction

Landlord

and

Tenant Act

1954

  • Procedure

regulating business

tenancy renewals

  • Need

for

issue

  • f

proceedings

  • Tight

timescales

c.f

dilapidations

claims

(12

years)

  • Early

resort to

the court process

c.f

Practice Direction: Pre-Action Protocol

.h

s

. r- .~viYfvas~:sara t~ _~airke'ir~..

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  • '~erc~
:. ~

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slide-18
SLIDE 18

Introduction

contd.....

1954 Act

procedure

—formalisation

  • f

negotiation?

  • Exchange
  • f

claim and

defence

  • Formal

exchange

  • f

travelling draft

leases

  • Schedule
  • f

unagreed terms

  • Witness

evidence

  • Expert

evidence

slide-19
SLIDE 19

Introduction

contd.....

Steps

parties

would

take

anyway

if negotiating

  • H

OTs

  • Solicitors'

travelling drafts

  • Agents'

advice

  • n

rent levels

.~.,

::.:.~.

.., :::.~

slide-20
SLIDE 20

Introduction

contd.....

  • Court

process

is costly

  • verlay
  • Need

to have

fall-back

procedure

But.....

  • Parties
  • bliged

to

enter

Court procedure

(and

its costs)

quicker than they

may

wish.

.:.,:

.

i

~.,~

slide-21
SLIDE 21

Introduction

contd.....

Not

arguing

for

abolition

  • f

1954 Act

  • Stood

test

  • f

time

  • Well-known

process market

is used

to

working

to

  • Need

for

framework by

which unagreed issues

can be

resolved.

But.....

:

ti

.

~:<:;

.

:ti

.

::

.:.ti,.

slide-22
SLIDE 22

Introduction

contd.....

  • How

can

time

and

costs

  • f

the process

be avoided?

  • For

Tenants

in a rising market,

time

is money

'•:5::

slide-23
SLIDE 23

Introduction

contd.....

Four

possible strategies

1

Early

renewal

2 Calderbank/Part

36

Offers

3 PACT 4 Mediation

.: ;ti.

~~~ti

slide-24
SLIDE 24

Early

renewal

Start

renewal process

  • ff

early

  • Say

two

years

prior

to

Lease

termination

  • 1954

Act process cannot

start earlier

than

12

months

prior

to Lease termination

Possible to agree renewal

terms

before

need

to

submit

to

Court

arises?

slide-25
SLIDE 25

Early

r e n e w a l

contd.....

Rising market considerations

  • T

i m e a n d

m

  • n

e y

for

Tenants

  • Valuation

d a t e

is date

  • f

t r i a l

  • Trial could be

12

m

  • n

t h s

after process

has

s t a r t e d

  • Rent

set

for

w h

  • l

e

term

  • Lower

r e n t

if Lease

agreed

e a r l i e r v..

: : : : . r

slide-26
SLIDE 26

Early

renewal

contd.....

Possible

ADR

(PACT/mediation)

at early

stage

Downsides:

  • Un-co-operative

Landlord

  • Landlord

sees

process

as

'regear'

  • Extra

consideration

for early

renewal

  • No

Court process

=minds

not

focussed

  • n

agreement?

slide-27
SLIDE 27

Calderbank/Part

36

Offers

Way

  • f

using costs pressure to

persuade

un-co-operative Landlord to

compromise

Threat

  • f

Landlord having to

pay

costs

if

  • ffer

not

later

beaten Part

36

marginally

more

powerful

  • Penalty

interest

  • Indemnity

costs

  • 10%

bonus

costs

  • Only

fully works

if Tenant

is

claimant

.:~ti..

  • _

~~~:~..

~~::

.>::

slide-28
SLIDE 28

Calderbank/Part

36

Offers

contd.....

  • Can

be

made

at

any

stage

  • Probably

inappropriate to be involved in proceedings without considering

such

  • ffers
  • Ideally
  • ffer

accepted

to bring proceedings to early

end and

curtail costs

  • At

least

may

provoke

further

discussions

towards

settlement.

slide-29
SLIDE 29

PACT

Professional

Arbitration on

Court

Terms RICS/Law

Society

promoted

alternative to

Court process Stay

  • f

proceedings

to allow

PACT

to proceed

slide-30
SLIDE 30

PACT

contd.....

Advantages

  • Lease

terms/rent

decided by

property expert

  • Likely

to be

quicker

  • More

flexible

  • Possible

at

any

time

(before/after

start

  • f

proceedings)

slide-31
SLIDE 31

PACT

contd.....

Disadvantages

  • Possibly

more

costly

  • Still need

to prepare

like

for

the Court process

  • Pay

fees

  • f

third party

  • Difficulty of

agreeing

terms

  • f

reference?

slide-32
SLIDE 32

PACT

contd.....

  • PACT

take u

p?

How

many

have been

involved in a

PACT

reference?

  • Is PACT

really

a

popular

  • ption?

~~.::.

slide-33
SLIDE 33

Mediation

  • Mind-set
  • f

industry?

  • Result
  • f

not appreciating how mediation

works?

  • RICS

guidance

note

  • n

mediation

slide-34
SLIDE 34

Mediation

contd.....

Mediation (generally) contrasted with

arbitration

  • Consensual

process

  • Structured negotiation
  • No

compulsion

  • No

end

decision

  • No

limit

  • n

possible

  • utcomes
  • Not

necessary

for

extensive preparation

  • Fewer

lawyers?!

slide-35
SLIDE 35

Mediation

contd.....

Mediation

  • f

1954 Act

claims

  • Does

not prevent

need

for

proceedings

if time

limits

require

  • Start

well before

deadline?

  • Stay
  • f

proceedings?

  • Structure

for

the

negotiating process

  • Range
  • f

possible

  • utcomes
  • Specifically mentioned

in RICS

note.

  • Unlikely

to

get lease completed

  • n

the

day

.....

..:r.

slide-36
SLIDE 36

Mediation

contd..... Why

not

tried more

  • ften?
  • Unfamiliarity
  • No

'brand'

awareness

like PACT

  • Possible

wasted

exercise?

  • Choose

right

time

to mediate

.

X.. 1

slide-37
SLIDE 37

Conclusion

  • Some

process

must be gone

through

to

settle a

lease renewal

  • Time

is money in a rising market

  • Court

process

itself will incur

costs

and

take time

  • Consider

alternative strategies

  • What

about mediation??

slide-38
SLIDE 38

I

.

~

Legal Tips

for Retailers

Renewing Leases

i n

a

Recovering Market

Mark

Barley

and

Nikki

Powell

14 May 2015

.

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