Q1. Our traders have full Landlord and Tenant business tenancies with a clause in them that allows for a review of rents every 5 years. This is a very time consuming process as it requires the issue of Section 25 notices and protracted negotiations with the trader representatives and their legal representation which has led to either the rent remaining static or a slight decrease on the last two occasions, is there a better way of dealing with rent reviews?
A.N. Other City Council had a similar issue back in the early 90’s when it issued notices on its traders to invoke a rent review and the traders served counter notice and refused a rent increase. This led to protracted negotiations including a court case that took eight years to resolve the issue.
To avoid this happening again and with trader agreement a new clause was introduced into tenancy agreements that allowed for a “collar and cap” on annual 1st April rent increases. Rent increases were based on the January Consumer Price Index (CPI) level. Rent increases were agreed to be within the band 2.5% to 5%, so if CPI was running at 1.7% in January each year the rent increase would be the minimum of 2.5%. If it was running, for instance, at 8% then the Council got the maximum 5% and if was between 2.5% and 5% they got that exact level of increase.
This system resolved the ongoing issue with rent reviews and the Council added a further clause that said it would waive the increase altogether if trade had been particularly poor in the previous 12 months, guided by the level of annual footfall. (AW)
Q2. We have recently taken over operational control of a small to medium sized Market Hall (75 businesses) and have inherited the issue of tenants “building out”. Whilst I suspect most market operators face a similar issue, the situation we are facing has become out of control, with some tenants utilising more additional space outside of their units than that formally agreed to within. What would be considered the best approach in dealing with this issue?
Encroachment is an ongoing issue for many operators. The most effective way to address this issue is enforce the terms of your lease/licence agreement which should clearly lay out the area of use agreed upon as part of the tenancy. It would also be worth considering offering available additional space out for use by formal agreement. If the additional space required does not have a negative impact on access or impose any risks, this can be a useful way to gain additional income. (SH)