As a commercial landlord, your best case scenario for a lease is to achieve a long-term amicable tenancy arrangement where both parties comply with the terms of their agreement and both parties make profit. Of course, this is often not the case, with fluctuations in the economy preventing the even cash flow required to achieve this equilibrium. As with any relationship, managing situations such as this can be complex and convoluted. So how do you go about avoiding conflict from the outset?
The key to all successful relationships, whether personal or professional, is communication. Maintaining lines of communication with your commercial tenant will alert you to any potential cashflow issues that they may be experiencing, as well as any potential issues with the building which would benefit you to be aware sooner rather than later.
Rent collection is a time consuming and sometimes taxing aspect of managing commercial tenants. If undertaken individually, it can sometimes slip which can lead to payment arrears becoming unmanageable. One way of overcoming this is to employ a management agent. This link in the chain carries the expertise and experience to achieve higher rent collection rates, and to alert you and manage any issues that arise.
The timing of a break clause is set out in the lease document itself and the clause will have a strict timescale within which it must be enacted. In this way, should a tenant be failing in their compliance with the terms of a lease, the break clause can be the best path to managing that issue. In order to protect both parties, there should be covenants with which either party must comply in order to enact the clause. Balancing these can be complicated so a commercial manager can offer much-needed clarity.
Structural maintenance of the building is supported by agreed service charges, but the challenge here is in the grey areas of what constitutes structural maintenance. Many service charge disputes are caused by the failure of both owners and occupiers to properly understand the lease’s respective obligations and liabilities. Handled incorrectly, disputes can lead to legal battles and mounting costs. The experience of property management professionals is invaluable in managing the process of service charge setting and collection in such a way as to avoid these disputes. Setting, communicating and collecting service charges are time-consuming aspects of property management. However, there are still further administrative considerations which any owner or manager should also consider; including budgets, breakdowns of expenditure and reconciliation of accounts. However, ensuring that all of these aspects are managed effectively will prevent disputes before they can happen.
The Landlord and Tenant Act (1954) Part II exists as a statutory safeguard and can override a lease term. It is there to protect a tenant from excessive rental increases or unfair eviction, and for the landlord’s income protection and continuity. If a lease is to cover just a very short term, it can exclude the Landlord and Tenant Act provisions, although this carries its own challenges. Really, no matter what the scale of the commercial property, security of tenure is extremely important. A full understanding of the regulations surrounding this is, therefore, a priority in enforcing clauses within a lease.
Ensuring that both the words and spirit of a commercial lease are complied with is clearly not as basic a task as it may seem. There are aspects where clearly a tenant can be in contravention of a lease, and signs of potential problems of which a landlord should be aware. In order to deal with these situations successfully, communication needs to be ongoing and contractual responsibilities and liabilities should be understood. This is a circumstance in which commercial property agency and management professionals hold a uniquely able position.
To find out how Curchod & Co’s experienced property management team can help protect and manage your investments, please do not hesitate to contact us.
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