A vast majority of commercial property landlords all over the UK have been approached by tenants, who have tried to negotiate the terms of the lease that they originally signed. This has resulted in many commercial property landlords losing out on rent payments, according to research conducted by Creditsafe.
In September of this year, Creditsafe conducted a survey of commercial property landlords and found that over half of all landlords, in the last 12 months have been approached by their tenants to discuss their lease terms and 29 per cent had received late payments of rent or none at all. This has resulted in six per cent of firms that lease commercial properties to lose money due to clients ‘trying it on’.
Speaking of the issue, David Knowles, Business Development Director at Creditsafe, stated: “Many multi-year leases agreements were negotiated when the market was buoyant and many firms now find themselves tied into tenancy agreements that they simply cannot afford. It is immensely difficult to forecast for years into the future and some firms are tied into leases lasting over a decade.”
The retail sector, in particular has been struggling, as the leases are structured, which means that the rent will only ever increase, and never decrease. This has been a particular challenge for the sector, especially during today’s tough economical times, as My Knowles put across: “The retail sector has been particularly badly affected with leading brands negotiating with landlords to try and remain afloat amid torrid trading conditions on the high street.”
An example of the impact that the structured lease can cause, is Clinton Cards. The company with a possession of over 700 commercial properties and an annual rent cost of £80 million, asked their landlords in September, if they could pay a third of their rent, two weeks later than it was due to be paid.
“Commercial property management specialists and business owners can utilise credit referencing solutions to establish the creditworthiness of tenants. If firms embrace these solutions we believe we would witness a dramatic reduction in the number of firms losing monies as a result of tenants entering insolvency. Given the length of many commercial leases it is vital that the financial health of tenants is regularly reviewed if those responsible for managing these leases are not to lose out on vital revenues,” Mr Knowles added.
Creditsafe, which launched in 1997, now has a number of offices in the UK, Ireland, France, Germany Belgium, Sweden and the Netherlands. The company currently employs more than 500 people and have over 50,000 customers. Creditsafe holds information on around 4.4 million companies and approximately five reports are downloaded from their website every second.
