Rent Review Matters

Feb 2026. Rent review and third party reasons.

I act for a freeholder/ landlord whose tenant is a quoted property company. The tenant sub-lets the property to two different occupiers. The rent review in the head-lease between my client and prop co went to arbitration. In my submission to the arbitrator, I advocated that the hypothetical tenant could be an investor. In his reasoned award, the arbitrator rejected the possibility, preferring an occupier. As the actual tenant is an investor, the arbitrator’s reasoning did not make sense.

I act for the landlord of a double shop with two residential flats, the whole of which let to one tenant. The tenant occupies the double shop and sub-lets the flats. Before my client bought the freehold, the tenant had one shop and one flat, and had acquired the lease of the adjoining shop and its flat from the same landlord, and removed the dividing wall between the shops. On renewal of the previous two leases, a single lease. For the rent review, it is assumed that there are two shops. Under the lease, the tenant does not have the right to underlet just the ground floor either as a whole or in part. The review was referred to an Independent Expert. In my report, I acted as expert witness, I reasoned that the hypothetical tenant could be one tenant with two different businesses. In the reasoned determination, the IE opined highly unlikely that the hypothetical tenant would run a single business across two units or two different businesses each from one shop unit. Equally unlikely that the hypothetical tenant would want to occupy one or both flats for their own occupation or the occupation by an employee. IE, agreeing with the tenant’s surveyor, not recalling the last time they came across such a letting in the open market. The most likely scenario that a hypothetical tenant would acquire the property with the intention of removing the dividing wall to trade from one enlarged ground floor. So because under the Lease is the assumption the dividing wall remains, 7.5% allowance is appropriate.

For possibilities to be dismissed because the third party’s experience is limited is galling. I have experience of dual situations, including acting for one such tenant whose two shops on the same lease are used for different businesses, and when acting for a landlord on referral to a different IE where the single tenant also has two separate businesses. In another matter recently, approximately 10 miles from the double shop example, acting for a landlord on a review to an arbitrator, my evidence included a new open market letting to one tenant who divided the shop into two separate businesses.

The qualifications to be an arbitrator or independent expert imply wide-ranging experience. There is no excuse for a hypothesis to be ruled out just because of personal experience. Arbrix should in my view create a database of experiences so that even if a particular third party has no experience, it would be known another has, The particular third-party could then say something like ‘although I have no experience, I’m aware that others do.’

Feb 2026 – The RICS DRS marking 50 years this year is to be congratulated. I have paid tribute direct including. of course, it helps to have a monopoly for appointments in probably every lease of commercial property in England and Wales. It wasn’t always thus. My experience of dispute resolution pre-dates the RICS DRS. I remember when procedure was a lot different. For examples, (i) for appointment, the Institute of Arbitrators, (ii) two persons to be appointed as arbitrator; (ii) the President of the Law Society; and (iv) the President of a Chamber of Commerce local to the premises.

Ever since invited and accepted appointment to act as Independent Expert to determine the rent review of a shop in Willesden, London NW10, I have breathed a sigh of relief at never again. From that experience, I concluded not an enviable task. It is all very well inviting representations from the parties, but not if they are so subjective as to be of no assistance at all.

When you know the buck stops with you, it is perhaps inevitable to be cautious. As suggested to me during a discussion about a disappointing outcome, the client impression of a third party nervous of six figure rents. (Please read my article “Third Party Inexperience”.)

I thoroughly enjoy acting either as expert witness or advocate, or in a dual-role clear at all times in which capacity. Nowadays I’ve a reputation among third parties for being thorough. Or, as my wife remarks, whenever I emerge from days of intense writing, doing the other person’s job for them. For example, a landlord’s surveyor’s offering is 7 megabytes, whereas mine for the tenant is 101 megabytes.

My decision at the start of this year to tell RICS DRS Independent experts that their directions must not be akin to those of arbitrators is underway. No reliance on SOAF. Unless premises are awkward configuration, it shouldn’t cost the parties more than about 30 minutes of the IE’s time to measure areas. i make up for assertive in procedure, a separate issue to the quality of assistance: hence my preference for thorough.

On 6 September 2013 in Lexology, Nicholas Cheffings and Dellah Gilbert, of Hogan Lovells solicitors, in their article about the RICS consultation on Independent Expert rent reviews, refer to “The document recognises that, contrary to what may be seen as the leading strengths of independent expert determination (namely, a quick, simple and cost-effective means of dispute resolution) it has become stablished practice to invite the parties to provide material to the independent expert in much the same way as if the matter were proceeding by way of arbitration. This seems to reflect the parties understandable desire to “have their say” rather than simply relying upon the independent expert as being truly “independent” as well as “expert”. Perhaps the parties should give more consideration to going back to basics, dispensing with expert evidence and simply asking the independent third-party for an answer to what is, more often than not, a straightforward valuation question.”

A list of multiple retailers that have entered administration and/or rescued and/or downsizing since 2003 and before. 2026-02-06 – I am redoing the order, abc and the year.

Yesr	Name	Founded	Year	2 time	3 time	4 time	Notes
	Actif t/a Elle in UK		2006
	Acord Pet Centres		2009
	Adams		2008	2010
	Adiii		2009	2020
	Adjustbetter t/a Kookai		2006
	Albemarle & Bond		2014	2019
	Alexon		2011
	Alders		2005
	Allied Carpets		2009
	All:sports		2005
	Andy’s Records	1969	2003
	Antrad		2005
	Apollo Video Apollo 2000		2007	2009
	Aquascutum		2012
	Art		2008
	Au Naturale		2008
	Aurora t/a Karen Miller, Coast, Oast, Warehouse		2009				Seeks rent relief
	Azendi		2012
	Ball Shoes		2003
	Balls Brothers		2009	2010
	Bank		2015
	Bargain Books		2007
	Baron Jon		2006	2010
	Barratts		2013
	Barratts Priceless	1903	2009	2011
	Base Buy		2005
	Base Menswear		2008
	Bathstore		2019
	Baugur		2009
	Bay Trading		2009
	Beatties of London	1938	2001
	Beds Direct		2008
	Bennetts		2011
	Bennetts department store	1734	2019
	Better Bathrooms		2019
	Bewise		2006
	Birthdays		2009
	Blacks Leisure		2009	2012
	Blockbuster		2013
	Blooming Marvellous		2009
	Bonmarche		2019
	Bookworld		2007
	Boozebuster		2009
	Borders UK		2009
	Bottle Shop (The)		2019
	Bottoms Up		2009
	Box Clever		2003
	BrewDog	2007	2026
	British Bookshops & Stationers		2011
	Bros Studio Stores		2011
	Chapelle Jewellery		2019				In adminstration. Acquired by F HInds
	Clinton Cards		2012	2019			Pre-pack
	Confetti		2010
	Cruise		2010
	Debenhams	1778	2019	2020			1985 acquired by Arcadia Group
	Dorothy Perkins	1979	2020				Arcadia Group
	Envy		2010
	Ethel Austin		2010
	Faith Shoes		2010
	Famous Army Stores	1940s	2016				Acquired by Blacks Leisure Group
	Forever 21		2019
	Gadget Shop (The)	1991	2006
	Gerry Weber		2019
	Greenwoods	1860
	Hardy Amies			2019
	Jack Wills		2019
	Jessops			2019
	Joy		2019
	Karen Miller / Coast		2019				Shops only (On-line sold to Boohoo)
	L K Bennett		2019
	Labsport		2010
	Links of London		2019
	Mamas and Papas		2019
	Money Shop (The)		2019
	Montague Burton	1903	2020				Arcadia Group
	Mothercare		2019
	Office Outlet / Staples		2019
	Patisserie Valerie		2019
	Peter Robinson / Top Shop	1964	2020				Arcadia Group
	Principles	1984	2020				Arcadia Group
	Pretty Green		2019
	Quiz		2020	2025	2026
	Racing Green (SRG)		2010
	Realbuzz		2019
	Regis UK / Supercuts		2019				Management buy-out, but 60 branches to close
	Rococo Chocolates		2019
	Select Fashion		2019
	Skandium		2019
	Steamer Trading		2019
	Stefanel		2019
	Stokes		2010
	Suits You (SRG)		2010
	Superfi		2019
	Talkworld		2006				Shops only
	Thoughts		2010
	Thomas Cook		2019				Liquidation. 555 shops sold to Hays Travel / Just Go
	tReds		2019
	Universal Stores	1900					1930 name change to Great Universal Stores
	Vergo Retailing		2010
	Virgin Cosmetics		2010
	Vodafone		2019				to close 421 shops in UK
	W Waide Pollard & Sons	1922	c1994
	Wallis	1923	2020				Arcadia Group
	Whittard of Chelsea	1886	2008
	Wild and Gorgeous		2019				2 branches
	Yorkshire Linen Company (The)		2019
2020	Aldo
	Antler (luggage)
	Ashbury Furniture
	ASK Restaurants	1993
	Autonomy Clothing
	Beales Department Store						1st time
	Bonmarche						2nd time
	Brighthouse
	Casual Dining Group (The) – Bella italia, Cafe Rouge, Las Iguanas						Notice of intention to appoint administrators
	Dawson’s Music
	DVF Studio
	Ena Shaw
	J Crew						USA parent in Chapter 11 bankruptcy protection
	Johnson’s Shoes (also t/a Bowleys Fine Shoes)
	Hawkins Bazaar
	Hearing and Mobility
	Homebase						Quitting CVA early
	Kath Kidson
	Kikki.K
	L K Bennett
	Laura Ashley
	Le Pain Quotidien						1st time
	Lombok
	Monsoon
	Oasis
	Oddbins / Wine Cellars						bought by Wine Retail (2024)
	Quiz						1st time
	T J Hughes Outlet
	Victoria’s Secret (UK)
	Warehouse
2022	M&Co
	Poundstretcher
2023	Bateman Opticians
	Cath Kidston
	In-Time						bought by Timpsons
	Le Pain Quotidien						2nd time
	Middletons
	Paperchase
	Planet Organic
	Scotch and Soda
	Shaws The Drapers
	Snowdrop Independent Living
	Stanley Gibbons
	Victoria Plumb
	Vashi
	Wilko
2024	Carpetright
	CTD Tiles						bought by Topps Tiles
	Hadfields bakery
	Homebase
	Lloyds Pharmacy
	Matches
	Muji
	New Look						? time
	Select Fashion						2nd time
	Shuropody						many branches closed
	Ted Baker
	The Body Shop	1976
	The Floor Room
	Tile Choice
	Wine Retail
2025	Beales Department Store						2nd (last store)
	B&M						falling sales
	Bodycare
	Brewdog						closing 10 branches
	Buzz Bingo
	Central England Co-op						19 branches to close
	Claire’s Accessories
	Coopers ofv Beccles
	Fired Earth
	Gusto Italian restaurant						closing almost half of its branches
	Iceland						closing 2 branches
	Leon						Major restructure and 20 restaurants closed
	Lloyds Banking Group						Lloyds Bank, Halifax. Bank of Scotland 136 branches closing 2025 to March 2026
	Marks & Spencer						closed store in Wolverhampton
	Maxideal
	Milletts						closing 6 branches
	Missy Empire
	Monki. (H&M Group)						all closed
	NatWest Bank						>1400 branches closed in past 10 years, 54 more this year
	New Look						closing 13 branches
	Oddies Bakery
	Original Factory Shop						struggling and closing branches
	Papa John’s						closing 74 branches
	PaintWell
	Parravani’s Ice Cream						1 branch oldest ice cream shop in Britain
	Pizza Hut (UK)						68 branches closed
	PMT (S&T Audio Ltd)
	Poundland (Pepco)						sold for £1 and closing branches
	Prezzo						downsizing
	Quiz Clothing						2nd time
	Revolution Bars						closing branches and re-financing
	Santander						closing 95 branches
	Select Fashion						3rd time / part rescued
	Seraphine
	WH Smith						closing 17 branches; and all shops sold to Hobbycraft rebranded TG Jones
	Winfields Outdoors
2026	Claire’s						Administration
	Original factory Shop (The)						Administration
	Primark						1 store closed )Dartford) for repair issue
	River Island						CVA restructuring, to close at least 26 stores
	TGI Friday						Administration resulting in 16 UK stores and 33 rescued.
	Quiz

Yesr	Name	Founded	Year	2 time	3 time	4 time	Founded / Notes
2003	Andy’s Records						1969
2004
2005	Alders
	All:sports
	Antrad
2006	Actif t/a Elle in UK
	Adjustbetter t/a Kookai
2007	Apollo Video Apollo 2000			2009
2008	Adams			2010
2009	Acord Pet Centres
	Adiii			2020
	Allied Carpets
2010
2011	Alexon
2012	Aquascutum
2013
2014	Albemarle & Bond		2014	2019
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026	Quiz
	Art		2008
	Au Naturale		2008
	Aurora t/a Karen Miller, Coast, Oast, Warehouse		2009				Seeks rent relief
	Azendi		2012
	Ball Shoes		2003
	Balls Brothers		2009	2010
	Bank		2015
	Bargain Books		2007
	Baron Jon		2006	2010
	Barratts		2013
	Barratts Priceless		2009	2011			1903
	Base Buy		2005
	Base Menswear		2008
	Bathstore		2019
	Baugur		2009
	Bay Trading		2009
	Beatties of London	1938	2001
	Beds Direct		2008
	Bennetts		2011
	Bennetts department store	1734	2019
	Better Bathrooms		2019
	Bewise		2006
	Birthdays		2009
	Blacks Leisure		2009	2012
	Blockbuster		2013
	Blooming Marvellous		2009
	Bonmarche		2019
	Bookworld		2007
	Boozebuster		2009
	Borders UK		2009
	Bottle Shop (The)		2019
	Bottoms Up		2009
	Box Clever		2003
	British Bookshops & Stationers		2011
	Bros Studio Stores		2011
	Chapelle Jewellery		2019				In adminstration. Acquired by F HInds
	Clinton Cards		2012	2019			Pre-pack
	Confetti		2010
	Cruise		2010
	Debenhams	1778	2019	2020			1985 acquired by Arcadia Group
	Dorothy Perkins	1979	2020				Arcadia Group
	Envy		2010
	Ethel Austin		2010
	Faith Shoes		2010
	Famous Army Stores	1940s	2016				Acquired by Blacks Leisure Group
	Forever 21		2019
	Gadget Shop (The)	1991	2006
	Gerry Weber		2019
	Greenwoods	1860
	Hardy Amies			2019
	Jack Wills		2019
	Jessops			2019
	Joy		2019
	Karen Miller / Coast		2019				Shops only (On-line sold to Boohoo)
	L K Bennett		2019
	Labsport		2010
	Links of London		2019
	Mamas and Papas		2019
	Money Shop (The)		2019
	Montague Burton	1903	2020				Arcadia Group
	Mothercare		2019
	Office Outlet / Staples		2019
	Patisserie Valerie		2019
	Peter Robinson / Top Shop	1964	2020				Arcadia Group
	Principles	1984	2020				Arcadia Group
	Pretty Green		2019
	Quiz		2020	2025	2026
	Racing Green (SRG)		2010
	Realbuzz		2019
	Regis UK / Supercuts		2019				Management buy-out, but 60 branches to close
	Rococo Chocolates		2019
	Select Fashion		2019
	Skandium		2019
	Steamer Trading		2019
	Stefanel		2019
	Stokes		2010
	Suits You (SRG)		2010
	Superfi		2019
	Talkworld		2006				Shops only
	Thoughts		2010
	Thomas Cook		2019				Liquidation. 555 shops sold to Hays Travel / Just Go
	tReds		2019
	Universal Stores	1900					1930 name change to Great Universal Stores
	Vergo Retailing		2010
	Virgin Cosmetics		2010
	Vodafone		2019				to close 421 shops in UK
	W Waide Pollard & Sons	1922	c1994
	Wallis	1923	2020				Arcadia Group
	Whittard of Chelsea	1886	2008
	Wild and Gorgeous		2019				2 branches
	Yorkshire Linen Company (The)		2019
2020	Aldo
	Antler (luggage)
	Ashbury Furniture
	ASK Restaurants	1993
	Autonomy Clothing
	Beales Department Store						1st time
	Bonmarche						2nd time
	Brighthouse
	Casual Dining Group (The) – Bella italia, Cafe Rouge, Las Iguanas						Notice of intention to appoint administrators
	Dawson’s Music
	DVF Studio
	Ena Shaw
	J Crew						USA parent in Chapter 11 bankruptcy protection
	Johnson’s Shoes (also t/a Bowleys Fine Shoes)
	Hawkins Bazaar
	Hearing and Mobility
	Homebase						Quitting CVA early
	Kath Kidson
	Kikki.K
	L K Bennett
	Laura Ashley
	Le Pain Quotidien						1st time
	Lombok
	Monsoon
	Oasis
	Oddbins / Wine Cellars						bought by Wine Retail (2024)
	Quiz						1st time
	T J Hughes Outlet
	Victoria’s Secret (UK)
	Warehouse
2022	M&Co
	Poundstretcher
2023	Bateman Opticians
	Cath Kidston
	In-Time						bought by Timpsons
	Le Pain Quotidien						2nd time
	Middletons
	Paperchase
	Planet Organic
	Scotch and Soda
	Shaws The Drapers
	Snowdrop Independent Living
	Stanley Gibbons
	Victoria Plumb
	Vashi
	Wilko
2024	Carpetright
	CTD Tiles						bought by Topps Tiles
	Hadfields bakery
	Homebase
	Lloyds Pharmacy
	Matches
	Muji
	New Look						? time
	Select Fashion						2nd time
	Shuropody						many branches closed
	Ted Baker
	The Body Shop	1976
	The Floor Room
	Tile Choice
	Wine Retail
2025	Beales Department Store						2nd (last store)
	B&M						falling sales
	Bodycare
	Brewdog						closing 10 branches
	Buzz Bingo
	Central England Co-op						19 branches to close
	Claire’s Accessories
	Coopers ofv Beccles
	Fired Earth
	Gusto Italian restaurant						closing almost half of its branches
	Iceland						closing 2 branches
	Leon						Major restructure and 20 restaurants closed
	Lloyds Banking Group						Lloyds Bank, Halifax. Bank of Scotland 136 branches closing 2025 to March 2026
	Marks & Spencer						closed store in Wolverhampton
	Maxideal
	Milletts						closing 6 branches
	Missy Empire
	Monki. (H&M Group)						all closed
	NatWest Bank						>1400 branches closed in past 10 years, 54 more this year
	New Look						closing 13 branches
	Oddies Bakery
	Original Factory Shop						struggling and closing branches
	Papa John’s						closing 74 branches
	PaintWell
	Parravani’s Ice Cream						1 branch oldest ice cream shop in Britain
	Pizza Hut (UK)						68 branches closed
	PMT (S&T Audio Ltd)
	Poundland (Pepco)						sold for £1 and closing branches
	Prezzo						downsizing
	Quiz Clothing						2nd time
	Revolution Bars						closing branches and re-financing
	Santander						closing 95 branches
	Select Fashion						3rd time / part rescued
	Seraphine
	WH Smith						closing 17 branches; and all shops sold to Hobbycraft rebranded TG Jones
	Winfields Outdoors
2026	Claire’s						Administration
	Original factory Shop (The)						Administration
	Primark						1 store closed )Dartford) for repair issue
	River Island						CVA restructuring, to close at least 26 stores
	TGI Friday						Administration resulting in 16 UK stores and 33 rescued.

Jan 2016. The RICS DRS (Dispute Resolution Service) marking 50 years this year is to be congratulated. I have paid tribute direct including, of course, it helps to have a monopoly for appointments in probably every lease of commercial property in England and Wales.

It wasn’t always thus. My experience of dispute resolution pre-dates the RICS DRS. I remember when procedure was a lot different. For examples, (i) for appointment, the Institute of Arbitrators, (ii) two persons to be appointed as arbitrator; (ii) the President of the Law Society; and (iv) the President of a Chamber of Commerce local to the premises.

Ever since invited and accepted appointment to act as Independent Expert to determine the rent review of a small shop in Willesden, London NW10, I have breathed a sigh of relief at never again. From that one solitary experience, I concluded not an enviable task. It is all very well inviting representations from the parties, but not if they are so subjective as to be of no assistance at all.

When you know the buck stops with you, it is perhaps inevitable to be cautious. As suggested to me during a discussion about a disappointing outcome, the client impression of a third party nervous of six figure rents.

I thoroughly enjoy acting either as expert witness or advocate, or in a dual-role clear at all times in which capacity. Nowadays I’ve a reputation among third parties for being thorough. Or, as my wife remarks, whenever I emerge from days of intense writing, doing the other person’s job for them. For example, a landlord’s surveyor’s offering is 7 megabytes, whereas mine for the tenant is 101 megabytes.

My decision at the start of this year to tell RICS DRS Independent experts that their directions must not be akin to those of arbitrators is underway. No reliance on Statement of Agreed Facts. Unless premises are awkward configuration, it shouldn’t cost the parties more than about 30 minutes of the IE’s time to measure areas. i make up for assertive in procedure, a separate issue to the quality of assistance: hence my preference for thorough.

On 6 September 2013 in Lexology, Nicholas Cheffings and Dellah Gilbert, of Hogan Lovells solicitors, in their article about the RICS consultation on Independent Expert rent reviews, refer to “The document recognises that, contrary to what may be seen as the leading strengths of independent expert determination (namely, a quick, simple and cost-effective means of dispute resolution) it has become established practice to invite the parties to provide material to the independent expert in much the same way as if the matter were proceeding by way of arbitration. This seems to reflect the parties understandable desire to “have their say” rather than simply relying upon the independent expert as being truly “independent” as well as “expert”. Perhaps the parties should give more consideration to going back to basics, dispensing with expert evidence and simply asking the independent third-party for an answer to what is, more often than not, a straightforward valuation question.”

Nov 2025 Shop Property Comparable evidence website.

Thank you again to the >2000 (on LinkedIn) that expressed interested in my idea. So I am sorry to disappoint, but I am not going to pursue the idea, as I envisaged.

Instead, I shall provide all the information free of charge – no payment, no log-in, no registration. To begin with, my database. Later, if anyone else would like to contribute information then that and their contact details (free advertising!) would be welcome.

The site coding design is complete and currently I am experimenting with ways to present the information. I have narrowed that to one of two ways, to be decided soon, so I can start adding information as soon as possible starting with London/Greater London.

As soon as I have added 100 properties, I shall remove the restriction on access so you can visit. After that, anyone looking for comparables is welcome to contact me and I’ll add all the information I have relating to where they are looking for evidence.

I hope that over time this will become a valuable resource for shop property comparable evidence.

Oct 2025. Here’s a conflict of interest issue. Surveyor A works for a firm of surveyors. Firm is instructed to do rent reviews for a multiple retailer. Directive nil increase. A gets to work and uses every trick in the book to achieve the client’s objective.

I am instructed to act for a landlord whose tenant is this multiple retailer. A’s negotiating stance doesn’t work on me. I refer the review to a third party.

A acts as expert witness. A’s report opinion is nil increase.

I tell third party that tenant has put A in an invidious position as regards his opinion because one of the tests of integrity for an expert witness is that the opinion would be the same if acting for the landlord.

In Report A rejects this criticism. In my counter-submission I find numerous flaws in A’s Report.

Third party determines an increase.

A’s client not happy with outcome. A’s firm loses client.

Oct 2025 – I have said this before, and I’ll say it again, not in the same words, there are a heck of a lot of private investors that have no idea what they’re letting themselves in for when they buy shop property investments.

Reality hits home on renewal of the lease. The cushion, of upward-only review, the rent payable after the review is agreed or ascertained, cannot go down disappears. In its place is exposure to the full force of the market.

Worry becomes evident where the review basis under the existing lease is index-linked. For lifestyles reliant on a level of rent that only exists during the term of the lease, to find that the initial rent on a renewal lease is much lower can make a substantial difference to investor financial security. Millions of GBP, lured into SIPPs by tax relief, lost.

From a surveyor’s persective, we deal with what is and the evidence. The real challenge is in managing client expectations. In my opinion, we wouldn’t need to if the client were better informed to begin with. But informed advice competing with popular thinking is heavy-going. I have had clients argue that what I am saying does not make sense in the context of what everybody else is doing. Long ago, one client in particular said he would never buy anything if he took my advice. A consequence of that remark is that nowadays anything I say when my advice is sought is introduced with that warning.

Specialising in rent review, one becomes sensitive to the subtleties and nuances that make a difference between a prudent and foolish purchase. Many private investors buy on yield compared to putting the money on deposit at the bank. Yield is a reflection of market sentiment at the time. Except for high-yielding investments that are obviously ex-growth, yield is not a determining factor for whether the property would make a good investment. In the same way there are thousands of quoted companies on the stock market that are very good businesses, relatively few are good investments.

Inexperienced armchair investors can spend their money on whatever they like. But going into a marketplace which they have no proper understanding of what it’s all about, let alone the terms and conditions of the lease, leaves them exposed to the high risk in loss of irreplaceable capital.

If you buy a 6% yield, then that equates to 16.67 years purchase, almost 17 years before you get your money back, during which time anything can happen. The structural change in retailing, on-going unabated for years, isn’t suddenly going to revert to its level playing field. The cliff edge is crumbling into the sea. Attracting retailers are withdrawing, taking customers with them. Institutional investors pruning portfolios of everything that has gone or will be going ex-growth.

Property’s reputation as a long-term hedge against inflation only applies to judicious choice. For everyone else, it’s a lost cause.

Sep 2025. Comparable Evidence site update. I don’t know how others do their websites – unless I’m told – but I’ve always done the look and written all content for mine. My first site used NetObjects Fusion until a developer told me it used proprietory code so if anything went wrong then I’d have to find a NOF person to fix it. Onto Dreamweaver and using an included template, ‘liquid layout’. Once upon a time, site designers expected the visitor to adjust to fixed width layout. I wanted my site adjustable so, when the user narrowed or widened the browser, the content would follow suit. Dreamweaver, a steep learning curve for my novice technicalities. I attended evening classes but, because the lessons for people that’d never had a website, I mostly chatted with the tutor afterwards about what I needed to know.

Soon after I changed all my office systems to Apple – Intel inside – it was an excruciating wrench to give up Dreamweaver and get a desktop website designer software, Rapidweaver. Odd feeling having to give oneself permission to do something. Gradually settled in to someone else’s idea of a theme (appearance) customisable only up a point, and in common with many RW buyers, a fortune spent on add-ons rarely used. Despite RW’s developers in Brighton, UK, most third-party developers in USA. Good at latching on other people’s ideas, a clever USA developer designed “stacks” for RW, a layer on top of RW’s structure, enabling other developers to create all manner of stacks to slot onto the underlying stack. Among the latch-ons was a self-taught UK-based theme/add-on developer – “W” – an excellent reputation for help and service. I’d bought some of W’s themes and slot-on stacks so, in 2014 when I wanted on my site my Index-Linked Rent Calculator, I asked him to design to requirements. The popularity of stacks was, in my opinion, a contributory factor in RW’s downfall. When everyone else is making more money out of your idea than you, time for a rethink. RW developers have redone their product, in the process falling out with the latch-on developers.

Not wanting to go in same direction as RW, I asked W to put my site onto WordPress. I changed my ISP, having been with the same for >30 years, to a USA ISP, also popular with RW users – its owner, by coincidence, has stayed in a hotel in Boston USA whose previous landlords had consulted me on the lease renewal – and with whom W has an established working relationship. No complaints about my UK IPS, I felt it best for W to deal with people he knows. Having my 4 sites looked after by others is strange, but pleasurable. I’ve asked for the design, but written all content.

And so to Comparable Evidence site, layout is intuitive. No frills, keep it simple. Target market users are busy, don’t want be faffing about. For evidence, for example, in Fulham Palace Road, Hammersmith, London W6, click tags Hammersmith Fulham Palace Road or London W6 Fulham Palace Road. Almost there for you to access for any suggestions on improving navigation.

My website developer, having designed to my specification an accelerated search filter for my Law Library site, we are adapting it for the Comparable Evidence site. So I’ve scrapped my considering limiting the CE site to London.

Until the filter is up and running, i won’t be adding any more data for comments on presentation. To provide an insight, if for example you are looking for rents in London N1 then you would enter London N1 in the search filter and all entries for London N1 would be displayed in natural sort order. Each entry will have tags so if you only want info for Caledonian Road, London N1 then there will be a tag London N1: Caledonian Road.

A similar principle for anywhere else. For example, if you are looking for info in Plymouth then filter P and scroll all places to Plymouth where each entry will have a tag to its address and in the list of tags Plymouth: Mutley Plain, Plymouth: Cornwall Street; and so on.

But you won’t have to filter for the town to begin with. You can scroll the list of tags for the town and any roads with available data. For London areas, using the N1 example above, if you’re looking for King’s Cross then they’ll be a tag for that and King’s Cross: Caledonian Road.

Something else I’m intent on and that is to avoid duplication. Where I have info for the same property in different years, each entry will confirm and have a tag with a unique number so that you can find all the info easily, without having to wade through all entries. This will avoid a typical time-wasting feature in other databases where a search resulting in, for example, 25 properties only to find that after sifting the result is 6.

There will also be tags for important factors, for example: corner/RF, seaside, LTA54 excluded, and where available an indicative Zone A value.

Sep 2025. On referral and in the process of agreeing a Statement of Agreed Facts, it appears – in my experience – to be taken for granted that the SOAF will contain proforma of so-called comparable evidence even if neither party’s surveyor has had any involvement with the evidence premises. And not only reliance on hearsay but also no attempt to provide copy leases to complement.

Hearsay evidence may be admissible, but case law has examples where the court has placed no weight on an expert witness evidence because copy leases were not provided so the court did not know whether there was anything onerous in them that would affect the rents.

It’s not uncommon for someone signing a proforma to omit material information and/or not having seen the lease. Yet reliance on such possibly mis-information is rife. Why some third parties are accommodating is beyond me. Despite the information on the Arbrix website, I conclude a difference between the theory and in practice.

Paying lip service to the RICS PS is one thing, quite another to purport to be an expert witness when not up to the task.

The level of competence to be an EW exceeds that of a chartered surveyor. In counter-submission, the way to sort the wheat from the chaff and destroy a pretend expert witness’s credibility is to highlight one or more of the top 5 mistakes that EWs make. I’m not going to tell you what they are because if we’re up against one another and you make a mistake, then you’ll be first to read what I’ll be telling the third party.

It’s ok for an EW to advocate for the methodology, but not for the case itself. When acting for a tenant who doesn’t care about the rules provided the result is as the tenant wants, I suggest that if you value your self-respect, then declining the instruction wouid be best.

The bottom line is the answer to which is more important? The fee or professional integrity.

If you don’t want to have to choose, then don’t cut corners because for rent reviews, as in most things in life, that’s where the angles are.

Aug 2025. VOA areas and rent review. In many places, and often contrary to what is on-line, the VOA zoning methodology is not 6.1m/6.1m/6.1m (20’/20’/20′). but 4.57m/ 7.62m/ 6.1m (15’/25’/20′). Where VOA areas are relied on assuming 20/20/20 when they’re not is a common trip-up for rent review surveyors none the wiser. (Strictly, 20 ft = 6.096m)

Possibly common knowledge amongst rating surveyors, but perhaps less so for rent review surveyors, is the VOA zoning of shops in the London Borough of Lambeth.

In Wei Xialoli v Nicola Johnson (VO) 2025, a Lead Valuer in the National Valuation Unit of the VOA said that the VOA adopts two zoning methods in London Borough of Lambeth. For main shopping centre locations, three 6.1m (20′) zones and a remainder. In secondary locations, two zones A 4.57m, Zone B 7.62m. and a remainder.

For evidence of rental growth for adjusting to the avd, this case contains comment about VOA reliance on a Costar report, and why the Tribunal placed no weight on it. A similar observation about the usefulness or not of generalisation reports is in House of Fraser Ltd v Scottish Widows plc 2011.

In my experience of referrals, it is common for reports published by big firms of surveyors, market commentators, trade bodies, and local organisations. to be cited as evidence. Whether any weight would be placed by a third party on such so-called evidence depends upon the report author(s)’ methodology. Usually, the methodology is to be found somewhere in the report and, in my experience, rarely of any relevance to the premises in question.

Regarding the VOA’s two methods in LB Lambeth makes me wonder whether the VOA has two methods elsewhere. In principle, it doesn’t matter provided the methodology in each VOA Scheme is consistent, but how do we know it is?

For anyone inexperienced of market rent valuation for rent review, the VOA information on-line is misleading. What the VOA means by market rent and what rent review surveyors mean differ. I am acting for the landlord of a shop whose tenant’s representative has cited the Rateable Value as the market rent and asserting the VOA On line: “The Valuation Office Agency (VOA) uses a ‘rental’ method to value high street businesses like shops, hairdressers, betting shops and banks. The VOA gathers information about rents paid for shops and businesses. It analyses the information and works out a price per square metre. It also considers local conditions and things like unusual shops shapes, split levels and sales areas hidden by pillars. Zoning is used to apply the price per square metre to the property and get the rateable value. Each zone covers the width of the shop and usually has a depth of 6.1 metres. Zone A starts at the shop window. As you move further into the shop, each zone is half the value of the one before it. Spaces like store rooms or upstairs offices are valued but not as a zone.”

it gets worse, the VOA is on Youtube. https://lnkd.in/eGUAtxxW

Aug 2025. I’ve registered the domain: comparableevidence.com

To begin with, I’ve asked my site developer to launch a site modelled on the appearance and layout of my private access sites. The appearance isn’t trendy as more important it’s designed for users. I have a global search which doesn’t require match search terms that the user didn’t know to use before searching.

Once the site is launched, (possibly this weekend), I shall add approx 100 properties to exemplify presenting the information. Likely much will be historic – those of us into doing rent reviews thoroughly know that historic is valuable background. After that I’d appreciate please any of you so minded to visit the site and suggest any improvements to enable you to find what. you are looking for more efficiently.

Information will be in pages, categories and tags. The address of the property, page for towns, (page for London), tags for town and road. In London Suburbs, e.g., London W4, London W4: Chiswick High Road, Chiswick: Chiswick High Road. For Towns and Counties potted history (source Wikipedia, etc). Use & User for non-A1. As much as possible of information that i like to have whenever I do a rent review and lease renewal.

Aug 2025 – I’ve been checking Costar UK figures and claims. I daresay someone from C will correct if this is wrong. C’s accounts for y/e 2023, turnover £53,948,605. According to C’s promotion on YouTube it has 9500 agents. I doubt there are 9500 agents in UK. I would think that what C means by ‘agents’ are users. Each user pays £5678.80 which confirms that some firms get volume discounts. I’m thinking that because CBRE and Savills are amongst the >1500 responses, it must be costing them I guess at least £500,000 a year each to equip each of their surveyors with a sub. That’s a lot of wastage if each user doesn’t make use of every scrap of information. Easy to identify C’s big subscribers, an obvious target for my idea. Along with the hundreds of smaller firms.

Amongst C claims is the only company that provides Land Registry leases. I’ve got news for C: I’ve been doing that for years in my database. Someone has suggested I provide redacted third party awards and determinations. Now that would be a first. As would be reports packed with comparables and signed pro-forma. I’m waiting for his detailed advice but my website developer thinks it wouldn’t cost much to set up the site.

Aug 2025. According to LinkedIn, the analysis for response so far is 42% London area, and companies including CBRE, Savills, RICS. Interestingly, the RICS is taking an interest. Costar’s sub is at least £6000 (ex VAT) [subject to any discount for volume, I don’t know] per user, with each user monitored via log-in ID and verification code. For a large firm of surveyors, I would think each user almost if not all surveyors that would have use of the information, so the annual cost is massive. Given that each user is unlikely to want access to all listings, the wastage is disproportionate (arguably contrary to ESG principles!) 

A friend has likened my idea to David and Goliath and admirable, but I’d liken it to Aldi and Lidl v the big 4 supermarkets. The big 4 didn’t taken any notice of Aldi and Lidl in the latter’s early years in Britain but, as soon as people began to want to save money, the no frills-approach sent shock-waves through the big 4’s market. I read that Lidl is about to topple Morrisons.

In 1975, when I launched my specialist service for rent reviews, that also sent shock-waves through the market, so much so that the RICS relaxed its rules prohibiting chartered surveyors from promoting themselves as specialists. [My booklet “How to do a Rent Review” had sold 2000 copies long before the RICS published its version and copied my title. In those days, 1500 sales was good for a text-book.]

Let’s do it again!

[2025-08-19 -13:47 – response; 1289 impressions, 6 comments including 2 offers to invest in it. ]

Aug 2025. On LinkedIn i posted this disruptive idea. For sourcing comparable evidence, there are many sources amongst which Costar considers itself a leader. However, C is pricey because, as I understand, this may be wrong, one cannot limit a subscription to a particular type of property or location. I have a massive database of shop details (England and Wales), to which I’ve added for decades.

I am considering making the information available generally on a website that would list the address of every property, the date, and other useful information. Other surveyors / agents might also like their information listed. Anyone wanting details would pay a nominal fee for each item, no more than £1 with a discount for regular purchases, and where information is provided by contributor surveyors/agents I’d split the fee. The site would enable payment on-line and the information emailed direct within 24-48 hours. (For an additional fee, the Land Registry could be searched for lease dates so that an inquirer could obtain a copy lease direct.)

Obviously, there is a lot for me to think about, but at this stage all I’d like to know please is whether you’d be interested.

[2025-08-19 -13:47 – response; 1289 impressions, 6 comments including 2 offers to invest in it. ]
[2025-08-20 -19:40 – response: 1897 impressions, 3 more comments]
[2025-08-22 -11.02 – response: 2081 impressions, 0 more comments]

Aug 2025. Shop investment: direct or indirect? Direct is owning the property, indirect is a shareholder. Which is better depends upon judicious choice.

For direct ownership, cue is best taken from institutional investors. Pension funds have a longer time horizon. They do not pay 20 YP (5%) for 10 YP (10%) rack-rented investments. They do not buy on interest rates, but on growth potential: current and reversionary rental value.

Yield compression has distorted the difference. By introducing a valuation methodology that bears no relationship to the fundamental value of the property, only to the cost of borrowing, yield compression has influenced overpaying for ex-growth investments. The close-knit link between rent and capital value disconnected long ago.

Yield compression has rubbed off on valuation surveyors. Valuation reports are littered with examples of auction prices, despite auction prices bearing no relationship with the open market. Auction prices are not representative of the open market: they represent the price that someone on the auction day succeeded in paying. Just because auctions have overtaken private treaty as the No.1 method of transaction does not make properties at auction more valuable. All it means is that sellers are more likely to achieve higher prices and sell much quicker than if offered ‘subject to contract’.

Before yield compression entered investor thinking, a high yield was associated with no-growth or a problem property, a low yield with rental and capital growth. To afford on mortgage an investment whose rent does not cover the cost of borrowing requires other sources of income. Low yielding investments, the properties ‘worth’ buying, were and probably still are out of bounds for borrower-investors.

Cash buyers have also fallen into the trap. A cash buyer does not make an investor any the wiser. Landlords thinking they’re in control when actually it’s tenants that are in control means building into the purchase price more protection of the bottom line than normal. A typical example, a bank investment bought for security of rental income, until the lease expires, the bank vacates, the capital value drops circa 50% and finding a new tenant takes months.

A quantification for protecting the bottom-line is the discount that most quoted property companies think their shares suffer, but which for the shareholder provides a measure of protection that is generally unavailable in the direct investment market. Quoted propcos that think their shares are undervalued so waste money on buy-backs might achieve short-term response, but generally the share prices revert to norm. Without a substantial discount between NAV and share price, an assessment of the company’s value is akin to the yield compression that has taken hold of direct investment.

In favour of shares is that propco portfolios often include a quality of property rarely for sale. One must be careful. High-yield dividends typical of specialist REITs are a proxy for no-growth. Generally, I reckon propcos that were not REITs before it became fashionable to convert are a better bet.

To complement:

Quoted propcos on the London Stock Exchange. I’ve been looking at the dividend track record of some companies and one thing some have in common is that despite the board’s enthusiasm for how well the company is faring, the dividend doesn’t follow suit.

A difference exists between the board’s achievements and the stock market’s rating. The stock market looks ahead and share prices respond more to sentiment about the prospects than companies’ exuberance.

Consider for example NewRiver. A portfolio of mainly ex-growth shops whose tenants cater for local communities, a dividend that is less than last year and a share price falling, yet according to the board everything in the garden is rosy. It’s as if the board considers 9% divi yield ample for shareholders so why pay out more? So where’s all the money going? Salaries for directors and manager. Fees to external advisers. It’s against the FCA law to say buy or sell so you have to do your own research. High yield makes it hard for anyone to take over the company but who would?

Read the reports of Hammerson and Land Securities and both highlight that major retailers derive 30% revenue from the top 1% – 20 – shopping centres, of which Hammerson owns 10. I would think the other 70% derives from the 2nd and 3rd top which is a good omen. It means that for rental growth and share price performance and rising dividends, the only companies to share in are those that own shops in the top centres.

It used to be that for multiple retailers to have a branch in 1400 towns provided nationwide coverage. Then it became 200. Then 50 and very soon if not already it’ll be 10-20. My prediction some years ago that, except for their core prime positions, most provincial towns have gone ex growth seems to have come true. The decline of the high street is testimony. So while there will always be lettings, the chances of most retailers making enough to survive very long are slim. And they know it, which is why short leases are not a passing phase. And why in my opinion buying shop investments is likely to prove more expensive than buying shares in companies that own the very best.

Aug 2025. The River Island saga is a stark reminder of the risk run when large landlords relax their investment policies that they apply to small businesses.

Small businesses that are incorporated are normally expected to provide a personal guarantor when leasing premises, yet somehow the same strict approach is not required of multiple retailers. A classic example of investor short-sightedness is the pre-pack. Company x goes into administration whereupon the same directors form a new company and expect the leases of shops they want to keep to be granted to the new co, despite no trading record other than their director(s) responsibility for the insolvency. Of course, it’s rarely publicly accepted that it’s the director(s) fault the company became insolvent. It is always the market. In essence, the fault of customers in having become disillusioned with the retailer’s goods and services, yet not having the common decency to carry on spending regardless.

The writing is always on the wall. But ivory-tower directors are too proud to read it; better at not wanting to listen to anything they don’t want to hear. Bluntly, it’s not the market’s fault, not the fault of on-line or any of the other typical excuses that are rolled out whenever a multiple retailer fails. Always something else’s fault, always someone else’s fault, never theirs. Never the one person(s), in whose control the direction the company has taken, having gone the wrong way.

It is challenging to remain in sync with the ups-and-downs of the market place. It is much easier to come unstuck in times of change, caused simply by whenever the market is booming retailers get carried away by their enthusiasm, over-expand and become over-confident.

I wrote about disconnecting from reality years ago in my newsletter. I also wrote about how to avoid coming unstuck in times of change. Trusting intuition is not rocket-science.

CEOs often say it’s lonely at the top, expected to have all the answers yet no one to talk to. There is plenty of room at the top because the space enables intuition to flourish, free of the doubt others radiate. When you’re at the top, you become a shining light, to be seen from a distance. It’s from afar, from the lone voices in the wilderness that inspiration is derived. Not the ‘yes’ people that surround, only interested in what is, rarely what could be, never do it now. Likely, regular customers of River Island have been wanting to help for months, years maybe, I don’t know, but any failure of River Island’s management to take any notice of the one group of people that could help is insulting.

As for the creditor landlords, that’s what happens when you take a risk. By treating mutiple retailers as if they are more important than they are, landlords do themselves disservice.

I reckon the reason landlords are reportedly annoyed is that the investments were bought with other people’s money – shareholders and borrowing – and now the landlords are faced with the problem of how to repay.

Aug 2025. In my experience, RICS-appointed Independent Experts fall in one of two categories. (1) Conscientious – by which I mean the IE will measure the premises and calculate areas regardless of what the parties might’ve agreed, investigate, research and test evidence for accuracy with the person(s) involved and not merely rely on pro-forma possibly lacking in detail. (2) Charging as much as they can get away with for doing as little as possible – by which I mean relying on everything the parties provide, areas, evidence, etc: in other words, acting as if an arbitrator, judging not valuing.  In my experience (2) are the minority, but perhaps the conscientious might be the minority? 

The basis for (2) is Wallshire Ltd v Aarons 1989, enabling an IE to rely on what the parties’ representatives provide to the exclusion of all else. To ensure an IE takes everything into account, it is a norm for the parties to be represented by surveyors. So, as there is judicial support for total reliance, the likelihood of a claim for negligence succeeding against an IE who has availed of Wallshire undermines what the parties envisaged for the review if in practice the IE acts like an arbitrator.  

The only question an IE has to answer is what rent the IE would expect to achieve if instructed to let the premises on the review valuation date on the same lease/hypothetical lease.  The parties’ representations are akin to a side-show, but they become the main attraction for an IE taking full advantage of Wallshire and intent upon category (2). 

RICS DRS appointments are pot-luck: the parties won’t know who is appointed until either the DRS forewarns by disclosure for the parties’ comments or on appointment. Depending upon your experience of the appointed, you are not going to know whether in category (1) or (2).  You could ask the appointee whether he/she will measure and calculate areas and research evidence, or rely on what the parties present. I’d be surprised if an IE would commit to begin with. Although in principle a yes or no, the more likely one or the other would only be decided once all representations are in.  

The alternative is to leave the IE with no choice, but to measure and calculate areas, to research, investigate and test tevidence. That can be achieved by not agreeing areas and not providing any rent and evidence in representations. Whether a surveyor acting as an expert witness has to provide the IE with answers on a plate is a moot point. Certainly an advocate doesn’t. So, if you want the client to get what the client is paying for then advocacy would be the way. 

Jul 2025 Sometimes I tell landlord-clients that, despite the rent review to open market rent, it’s unlikely they’ll get it. Instead, they’ll get a rent pro rata that another unrelated landlord got for a different property. It’s a methodology that compares each rent review with what rent someone else has agreed, so that each subsequent review follows suit, rather than taking the lead.

The reason for such a daft system is that surveyors generally do not know how to value; they only know how to compare. If there’s nothing to compare with, then the tenant’s surveyor’s contention is no increase. Which is a nonsense.  I suspect the root cause is academic training. Teacher provides an example question for pupil to answer.  When self-taught, you learn to think for yourself. 

To avoid surveyors better at comparing than valuing, the solution, despite extra costs, is to refer the review to someone with no vested interest in the outcome.  

Another daft is two types of third party: independent expert and arbitrator; as for which that depends on the lease. The roles differ, but the RICS has decided almost the same.  The RICS’s definition of professional standards differs from mine. 

An IE is a valuer whose opinion of rent the parties have covenanted to accept.  The only question for an IE to answer is: “what rent would the IE expect to achieve if instructed to let the premises in the open market on the review valuation date on the same terms and conditions as the lease in question?” With no need for either or both parties to be represented – generally, they are, to ensure the IE doesn’t miss anything: some surveyors accepting the appointment are not as expert as should be  – IEs invite representations to avail lazily of Wallshire Ltd v Aarons 1988, for the question to be answered by the parties’ surveyors. A crafty IE can get away with charging as much as possible for doing as little as possible. 

With an arbitrator, it’s the same question, except an award on rent has to be at or in between the extremes of evidence.  The typical “I know the rent’s a lot higher, but I can’t prove it” arises.  While an arbitrator can adopt a robust approach and research evidence, inviting comment before making the award, in my experience, arbitrators rarely do. Instead, they rely on what the parties tell them, ignoring the question and excluding personal opinion.  Contrary to the strictures of the lease. 

So how can landlords get what the lease wants? One possibility is a minimum increase. That’s unrealistic where the open market rent is lower or the same. Another is index-linked rent. Well-advised tenants insist on cap and collar, a maximum increase, a minimum 1-2% which is unrepresentative of a rent for years before the next review. A combination of the two? No easy answer, it all depends. All I can say is that in every case in recent years I have obtained some increase even if the third party’s costs have been extortionate commensurate to the result. 

The alternative is not invest in commercial property, as numerous armchair investors wish they hadn’t.

Jul 2025 – Although Bill 2025 applies to rent reviews in leases outside the Landlord and Tenant Act 1954, more leases granted outside LTA54 is suggested as a likely consequence of upward/downward rent review.

The only times a lease can be granted outside LTA54 is on a new letting, or by agreement with an existing lease. An existing tenant might agree where the landlord wants to redevelop the property and will pay part of the statutory compensation in advance in exchange for the lease being outside the Act.

Outside the Act, (strictly, excluding s24-28 LTA54, involving a legal procedure which must be done correctly, failing which it is invalid) means that on expiry of the contractual term the tenant has no legal right to remain in occupation. Consequently, the landlord can dictate terms – including the new rent.

It’s not as simple as that. Being able to dictate terms doesn’t mean the tenant has to agree. So if the landlord would like the tenant to stay and the tenant would also like to stay, then the tenant’s bargaining power depends upon the value to the landlord of the tenant’s investment covenant. 

Corporate tenants in particular are well aware of the value of their investment covenant. A landlord therefore has to weigh up the cost and hassle of finding a new tenant – costs which include, but are not limited to, void period, hefty insurance premium for unoccupied premises, deemed supply unit rates for electricity and gas, empty property rates, agent’s commission for reletting, longer rent-free period, etc – against agreeing the tenant’s offer.

On expiry of the contractual term, having no legal right to remain in occupation, doesn’t mean the tenant would vacate. Ignoring the possibility of trespass, the occupation is a tenancy-at-will, but only while negotiations are ongoing. In the absence of negotiation, after a year the occupancy would become a periodic tenancy and qualify for renewal rights under the LTA54, entitling the tenant to at least 6 months notice either under s25 or s26. So, if the landlord isn’t careful, and whether or not rent is demanded or accepted, an outside the Act lease could be become an inside the Act tenancy, meaning that the only way the landlord could be rid of the tenant is to oppose on one or more of the grounds in LTA54 s30. And since to oppose means to successfully oppose by passing the tests of case law, the tenant would have to be satisfied or else the landlord would end up in court.

Jul 2025 – It’s rare for me to include an article on RRM written by someone else but I think the following is excellent. So, by kind permission of the author, Tom Pope of Lightlease:

“The government’s announcement this week to ban upward-only rent reviews (UORRs) in commercial leases across England and Wales is perhaps the boldest intervention in leasing practice in a generation. Part of a broader push to empower communities and revitalise local economies, the change zeroes in on a clause that has quietly shaped British high streets for decades — and arguably helped hollow many of them out.  But make no mistake, this is pretty seismic for all of us working in this sector! 

It’s rare that something as arcane as rent review mechanics ends up in a government bill. But here we are. And while investor nerves are understandable, it’s hard not to see this as a long-overdue correction — especially for those of us who spend our time advising occupiers.  Let’s start with where this matters most: retail and leisure. Unlike offices or warehouses, where lease lengths are shorter and break clauses more common, these sectors have historically been tied into long, rigid leases with upward-only reviews baked in. Once rent goes up, it never comes down — regardless of what’s happening in the local market, consumer demand, or a tenant’s performance. That rigidity has hurt. It’s left businesses stranded on pre-Covid rent levels in post-Covid economies. It’s propped up book valuations while units sit empty. And it’s stifled the very thing we need most right now: flexibility. We’ve seen occupiers opt for CVAs or closures rather than stomach rent levels that simply don’t reflect reality.

So a ban on upward-only clauses? It’s radical. But it’s also refreshingly pragmatic. Why should rent be a one-way street, when everything else in the market — demand, footfall, consumer habits — fluctuates constantly?  The move is framed as part of a broader effort to rejuvenate town centres. In truth, it’s about fairness. Tenants should share in the risk, yes — but so should landlords. If the market turns, rents should be allowed to adjust. 

That’s not revolutionary. For a glimpse of how this might play out, one can look to Ireland, which outlawed upward-only rent review clauses back in 2010 for new commercial leases. That change came amid Ireland’s post-2008 financial crash, when plummeting property markets and struggling retailers pushed the government to act (similar to the UK now wanting to save its high streets). Irish law now mandates that any rent review clause must be “upward or downward”, allowing rent to adjust to market rental value whether that is higher or lower. By most accounts, this has made the landlord-tenant relationship more equitable: tenants aren’t stuck overpaying if the market tanks, and leases better reflect real economic conditions. It’s palpably more fair, because the risk is shared – the landlord benefits when times are good, but also takes a hit when times are bad, rather than the tenant absorbing all the pain. Notably, despite dire warnings from investors in 2010, Ireland’s commercial property market did not collapse into irrelevance. While there was initial uncertainty (and an unsuccessful push to apply the ban retroactively to older leases, which the Irish courts blocked on constitutional grounds), the market adjusted. Irish landlords have since had to price in the possibility of downward rent movements – which likely meant slightly higher initial rents or other concessions – but the sky didn’t fall. In fact, Ireland today still attracts significant real estate investment, showing that flexible rent reviews can coexist with a healthy property market.

 It’s no surprise that many landlords and property investors are alarmed by this proposal – it effectively overturns a long-standing pillar of commercial real estate finance. Upward-only rent reviews have been so embedded in UK practice since the 1960s that property valuations and investment models grew to rely on them. For a landlord (especially large institutional investors like pension funds or REITs), a UORR clause was a safety net, ensuring that the income from a property would never dip below a baseline. It shifts the entire downside risk of the market onto the tenant. Investors have treated that guaranteed or steadily rising income stream almost like a bond – and priced assets accordingly. Take away the guarantee, and suddenly the future cashflows from a commercial lease become uncertain both up and down.

 Of course, there are risks. The industry’s concern is less about the principle and more about the uncertainty. UORRs have long underpinned how commercial property is valued — they provide a guaranteed income floor, which in turn supports lending, investment, and development. Take that away, and there’s a ripple effect across portfolios and pricing models. A drop in valuations is likely, and for some landlords, that will be painful. 

 There’s also the real prospect of unintended consequences, particularly in how landlords will adapt lease structures in response. One likely workaround could be a push for index-linked rents – tying rent increases to inflation (RPI or CPI) instead of open-market reviews. Index-linked leases have become more common in recent years and typically don’t allow decreases.  If every landlord suddenly insists on uncapped RPI-linked reviews as a substitute, tenants could actually face a different hazard: spiraling rents in high-inflation times.   To be workable, the law should ensure rents could fall if the formula or market conditions dictate.  In other words, the spirit of the reform is to make rents reflect market conditions – but a crude inflation clause might still guarantee upward-only rent in practice (inflation almost always being positive) and possibly yield even sharper rises than the market would. Tenants will need to stay savvy in lease negotiations to avoid new pitfalls.  Ironically, there is a valid argument that by removing one blunt tool (UORRs), the government might spur a flurry of rent disputes in the future. With no guaranteed uplift, every rent review could become a dogfight over what the “true” market rent is, possibly leading to more arbitrations and court referrals.

 Property lawyers note that alternative rent review models could gain popularity: for instance, turnover rents (rent based on a percentage of the tenant’s revenue), or “cap and collar” arrangements (which allow rent to fluctuate within a upper and lower band). Such mechanisms can offer a fair middle ground – ensuring rent can fall, but not by an extreme amount, or that landlords share in a tenant’s success rather than just their pain. The new law doesn’t forbid these creative structures; it simply outlaws the one-sided guarantee of no decreases. Indeed, upward and downward rent reviews have technically always been possible by agreement (just seldom used).

 Landlords will essentially face a choice: stick to fixed rents for the term, or allow rents to rise or drop at review.  The most obvious is outcome, which was becoming more prevalent anyway is a shift towards 5 year ex-act leases, giving landlords greater control of their asset after 5 years, but that won’t work with all tenants.  Some of our clients write their shop-fit down over a longer period than 5 years.

 But that doesn’t mean the status quo was working. UORRs created a distorted playing field, where over-rented units lingered long after their commercial logic had expired. They fuelled a kind of rental inertia — pushing landlords to keep units vacant rather than accept lower rents that might reset a valuation. I have been involved in countless situations with clients unable to shift a property because of an outrageously high rent that did not reflect the market, sometimes over-rented by more than 100%.  That sort of behaviour protects a spreadsheet, but not a street.

 This change could bring property values back in line with occupier economics — and that might be a good thing in the long run. It might also encourage more lease structures based on performance, flexibility, and genuine partnership. Turnover rents, mutual break clauses, and market-tracking reviews all have a role to play in a more adaptive leasing environment.

 For occupier-led advisors like Lightlease, this reform aligns with a shift we’ve championed for some time: putting reality back at the heart of rent negotiations. If the market moves, so should the lease. That shouldn’t scare landlords. It should focus them — on securing good operators, building long-term relationships, and keeping buildings vibrant and let.

The ban applies only to new leases and renewals, so the existing investment landscape won’t unravel overnight. But it does mark a turning point — and one that many of us will welcome. It may force discomfort in the short term, but in the medium term, it could lead to a more honest, resilient, and ultimately investable market.

 Will this intervention spark the renaissance of Britain’s high streets, or will it spook the very investors needed to rejuvenate them? The answer may lie in how both sides respond. If landlords pragmatically embrace more collaborative lease structures (rather than simply fighting or circumventing the law), and if tenants use their new leverage responsibly (not demanding unrealistic cuts but fair market rents), the outcome could be a more resilient, dynamic commercial property sector. At the very least, this policy has got everyone talking – and rethinking assumptions that seemed carved in stone. After years of seeing one side win at the expense of the other, the rent review battlefield might just become a place for genuine negotiation again. High streets have been crying out for change, and at long last, they’re getting one. Whether that change proves to be a saviour or a setback will be closely watched by communities and investors alike. 

I’m not trying to understate the impact this could have on the investment and valuation market, but the last 10 years has shown us the unsustainability of the current lease model and travelling the length and breadth of the country, I have seen the impact of this, (and I’m not suggesting UORR are the only contributing factor) on once vibrant communities.  For those of us living or working in London, it’s easy to forget about those areas outside of the prime retail and leisure pitches we visit, but most of us will have seen vivid examples of the degeneration of so many locations, it would be foolish to disregard the powerful ramifications it has on our society, culture and even politics. 

I have seen today a great deal of commentary criticising the move, particularly over the lack of consultation with the sector, an understandable point of contention.  But I would argue that this era requires more radical policies.  Some may call the government’s move a high stakes gamble (hence the cover image), but I wanted to outline some of the positives to be drawn from the news.  This will naturally be a divisive topic, but no harm in a healthy debate. Yes — this is big. And yes — it deserves scrutiny. But if you care about the future of our high streets, and recognise the critical role they play in the narrative of our country, you might just find yourself quietly on board. “

Tom Pope
https://lightlease.co.uk/team-1/tom-pope-7s779

[Michael Lever: Tom’s remark about index-linked reviews, a cap and collar would fall foul of the ban because the collar fixes a minimum. But a cap only would be ok. There is nothing in Bill 2025 to prevent a landlord from agreeing a ceiling on the rent.]

Jul 2025 – Inevitably, the powerful landlord lobby – institutional investors, pension funds, insurance companies, REITS, quoted and major property companies, their advisers, and likely thousands of anonymous private investors – are concerned about the proposal to ban upward only rent reviews and especially the lack of consultation. But, some 30 years ago, when the Government then consulted, it was persuaded not to by the landlord lobby and the RICS. So why would the incumbent Government want to risk politicians being talked out of it again?

In my experience, having acted for insurance companies and on numerous occasions against institutional landlords, such landlords, in common with many private investors, do not generally care a jot about tenants. The focus is on maximising the rent and the capital gain, regardless of the wider consequences. On ensuring that the purchase price and book value of the investment is at least maintained and wherever possible enhanced. Take property funds, for example, often overpay and every so often when investor money wants out, they freeze the fund on the ground of orderly disposal. And buyers at auction, not realising at the time they are being duped into overpaying, take out their mistake on the tenant.

As for the source of the money, easily fooled. Were it not for the carrot of tax-relief, who in their right mind would regularly hand over money to a stranger on the pretext that from the age of 50 they could withdraw up 25% of their money and with what’s left buy an annuity that drip-feeds their money back to them in ever decreasing amounts for the rest of their life. The promise (no guarantee) is an expectant growth rate of about 6-7% per annum.   What happens to the profit money? Spent on admin, inflated salaries for directors and managers, perks, a lifestyle summed up in the question;  “yes, but where are the customers’ yachts?” 

And what does the stranger do with the money? Buys stocks and shares, bonds and gilts, property, works of art (remember British Rail Pension Fund’s foray). And pockets the difference between trading and 6-7% pa.

In the USA, Benjamin Graham explained how. Charlie Munger and Warren Buffett proved him right. In the UK, I have acted for and against a few of the several long-established, secretive or low-profile private property companies that are seriously wealthy. But the institutional landlords, why not as successful as Berkshire Hathaway Inc? Here’s one reason:

During the 1930s, countless builders went broke, and the mortgagees, for example, Prudential, Legal & General, Norwich Union, took over parades of shops and residential flats. For years, they managed well until their asset managers decided that what they were doing was beneath them. So they sold all the parades to private investors who, over the years, have done very well, and thanks to inflation much better than the previous institutional landlords. [In 1984, Hillier Parker May & Rowden research discovered that secondary shop rents had increased at a rate of 9.2% per annum since 1979.] Imagine the return for pensioners had the institutions kept the properties.

Major institutions and quoted property companies spending other people’s money like there’s no tomorrow on prime property, that looks good in photographs but rarely performs as expected, contribute generously to the success of big firms of surveyors, solicitors, and accountants.

It’s one thing for institutions to have enough surplus cash at disposal to be able to afford to lend it to developers and investors, quite another to buy a low yielding property, to forward-fund a development to keep, and tie up lottery-winner capital in an illiquid asset. But who cares about that when the underlying concern is satisfying lust for compliments. In keeping with always someone else’s fault, the bottom line, when anything goes wrong, is to blame the state of the market.

It’s not surprising the landlord lobby is up-in-arms. The gravy train is about to come off the rails. The aspirational developer or investor with not enough money to name, but able to borrow on at least the same rent throughout the lease in exchange for paying interest and arrangement fees, is suddenly faced with the prospect that the profit margin, the loan to value covenant, is about to become much more risky.

Criticising the Government for interfering is a bit rich when many institutions and armchair investors have been interfering in a market in which they’ve no business to, other than latching on. Attempt is bound to be made for Bill 2025 to be watered down but, for now, it is the best news tenants have had for years. It goes to the heart of hierarchical supremacy by challenging the assumption that what the powerful landlord lobby wants, the powerful landlord lobby has to have.  

Fortunately for many tenants, many private landlords care and the relationship is rewarded by longevity of lease. But for the greedy, the aggressive, and the indifferent, this Bill is a wake-up call. 

Jul 2025 – 1.0 Buried deep within the English Devolution and Community Empowerment Bill 2025 published on 11 July 2025  (“Bill 2025”) is, in the word of one commentator, a seismic proposal that will, if as and when the Bill becomes law, affect all landlords and tenants of commercial property. Despite buried deep, pages 322-329 are also the last few pages of this gigantic Bill, which makes them easy to find. 

1.1 Bill 2025 is to “Make provision about combined authorities, combined county authorities, the Greater London Authority, local councils, police and crime commissioners and fire and rescue authorities, local audit and terms in business tenancies about rent.” (my italics)

1.2 Bill 2025 Schedule 31 – to insert Schedules 7A and 7B before Schedule 8 in the Landlord and Tenant Act 1954  – proposal is for upward-only rent reviews to be unlawful. 

1.2.1  Some 30 years ago, the Government then proposed to ban upward-only rent reviews but was, following consultation with commercial property market industry representatives, such as the British Property Federation (whose members are landlords, investors, owners, developers, funders, agents) and trade bodies, such as the British Retail Consortium, defeated by the powerful landlord lobby and the Royal Institution of Chartered Surveyors. The RICS, reasoning it should be voluntary, subsequently issued The Code for Leasing Business Premises in England and Wales 2007, sub-titled Leasing Business Premises: Landlord Code. 

1.2.2 The RICS quest for the Code was to promote efficiency and fairness in landlord and tenant relationships.  It was not a mandatory Code, (meaning chartered surveyors did not have to advise and recommend landlords to agree to the Code’s suggestions), and more importantly it was not obligatory – as if the RICS, a non-statutory body, could in any event have insisted – for landlords and tenants.  What the Code did do, however, was to provide tenants and legal advisers with a host of ideas for what could be agreed in the wording and phrasing of leases – and, in my view, paved the way for why solicitors when drafting leases and related documents for landlords sometimes give the impression of acting for the tenant.  

[1.2.3 As an aside, the one thing that is important to remember when you instruct a chartered surveyor is that the person concerned, known as a member, must comply with numerous mandatory dictates by the RICS itself, even if such dictates conflict with what you as the landlord or tenant want. This is not professional advice and recommendation in the purist form, but indoctrinated advice and recommendation intended to make you feel guilty if you do not accept it. If you agree, then no issue. But if you succumb then if you are a tenant, you could be missing out on the potential for minimising your property costs, and if you are a landlord, the potential for maximising the performance of your investments.

1.2.3.1 More than 150 years ago a small group of surveyors decided they were superior to other surveyors at the time so set out to break the loyalty between other surveyors and their clients by the only way possible which was to give the impression that other surveyors’ standards were inferior. Nowadays, through its members becoming in-house surveyors infiltrating corporate landlords and tenants, for its virtual monopoly of dispute resolution and deciding rents, for the range of services its members provide, the grip that the RICS has on the property market is wide-ranging and the influence of its members akin to tentacles. It is telling that more and more experienced surveyors are not becoming chartered surveyors because they value their freedom of thought and the benefit of unrestricted advice to clients.]

1.2.4 I mention the above “as an aside” because, in my view, the reason the incumbent Government did not consult the commercial property industry before announcing this proposal to ban upward-only rent reviews was to avoid politicians being talked out of it again. The official reason for the proposal is to help rejuvenate ‘High Streets’ and small tenants leasing shops on the High Street, but if that were the only objective then the proposal could have been confined. It is not. The proposal affects all landlords and all tenants and all business tenancies under the Landlord and Tenant Act 1954 Part II – whether inside or outside the Act.

1.3 Bill 2025 is not law. To become law, Bill 2025 will have to be debated by Parliament, the House of Commons, the House of Lords, the Parliamentary committee stages, and so on. As it will be some time before Bill 2025 gets to the stage of Royal Assent, and an ‘in force’ date, whether the wording of the proposal will remain intact is unknown. So all that can be said about the proposal is at the second stage of its reading, now.  

2.0 The phrase “upward-only rent review” is a technical term which, being popular, means different things to different people. For anyone who does not know what it actually means, there is no such thing as an upward-only rent review. The “upward” element does not refer to the valuation or calculation of the review rent itself, but to the rent payable after the review is agreed or ascertained as not less than the rent payable immediately before the review.  

2.0.1 ‘Agreed’ means agreed by the parties to the review. ‘Ascertained’ means decided by a third party under the dispute resolution procedure in the lease. A third party may be an arbitrator or an independent expert, depending on the lease. Either or both parties are often represented by surveyors or others.

2.1 A typical rent review valuation basis is the (open) market rent – ‘open’ is considered superfluous. Since the RICS 2007 Code many rent reviews have also become index-linked, commonly to the RPI (Retail Price index), more recently to the CPI (Consumer Price index), and occasionally the CPIH (CPI plus housing costs). Those indices are measurements of inflation. The RPI (generally considered more favourable to landlords) is no longer an official statistic, but the Office for National Statistics continues to publish the RPI because it is widely used. In 2030, the RPI and the CPI are to be merged.  Index-linked rent review is what is known as a formula review, an arithmetical calculation – it is nothing to do with the property, and outside the control of the landlord and the tenant. Index-linked reviews are typically found where the availability of open market rental evidence is difficult or impossible to find, in leases of specialist property categories and uses, and where the landlord wants to be reasonably sure of getting an increase that tallies with the commercial purpose of a rent review to keep pace with changing values. 

2.1.1 A market rent does not exist in isolation. As I say, rent is the product of the terms and conditions of the lease or the lease to be granted. As there is no standard form of lease for commercial property, terms and conditions vary depending upon what the parties agreed before the lease was completed, and the same or different parties for any subsequent variations. A single word or phrase can often result in a substantial difference in rent. For example, if the basic market rent were £50,000 pa then for the landlord an ill-considered word or phrase might reduce the rent to £30,000 pa. Or vice versa. A word or phrase might be considered so advantageous that a tenant would be expected to pay a higher rent. 

2.1.2  For a tenant, an index-linked rent review is a gamble on economic conditions. As the courts will not rewrite what in case law is known as a ‘bad bargain’, well-advised tenants will only agree to index-linked reviews subject to what is known as “cap and collar”. The cap is a maximum percentage increase, the collar a minimum percentage increase. Typically, a minimum would be 1% to 2%, the cap no more than about 6%. It doesn’t mean that the rent on review would increase by at least the minimum or the maximum, as that would depend upon the arithmetical formula in the lease, and the percentage change in inflation between the review dates. The norm is for the formula at each review date to be hinged to the index figure at the start of the lease. As the indices are published on or around the 17th of each month and one month behind, a well-drafted index-linked review will have as its base month the month that is 2 months before the start of the lease and 2 months before the review date.

2.1.3 In some leases, the rent is geared to the tenant’s business turnover. Known as a turnover rent, such leases are commonly found in edge- and out- of town outlet centres, designer outlets, and such like where the prices of goods offered for sale by retailers are approximately 70% of the prices of the same goods in the retailers’ high street shops. Less common are town centre shop leases whose upward-only rent reviews are a combination of market rent and or plus a fixed percentage of the tenant’s turnover.  

2.1.3.1 In designer outlet centres and such like, the leases are normally outside LTA54 with regular or rolling mutual break rights – so that tenant can terminate if the venture isn’t profitable or the landlord can relocate or eject underperforming tenants – and the rent a minimum base rent plus a percentage of the tenant’s turnover (the percentage varies depending on the nature of the tenant’s business). The turnover exclusive of VAT. 

2.1.3.2 For many years, I acted for a multiple retailer, the majority of whose shops were in outlet centres. Although, in most cases, the rent payable at each review could go up or down, one particular landlord’s leases enabled the rent payable at the previous review to become the minimum at the next review.  

2.2 Currently, a typical rent review will either be to the (open) market rent or a combination of open market rent and index-linked. For the upward-only, the wording of the review is typically the greater (higher) of the rent passing immediately before the review date and the open market rent and the index-linking. In other words, if the market rent is lower and the index-linked calculation a decrease, the rent payable after the review is agreed or ascertained would be the same as the rent payable before the review.

2.2.1  Typically, the minimum rent payable at the first review will be the rent at the start of the lease (or if the lease does not stipulate otherwise, then average rent pa over the period between the start of the lease and the first review date, if at the start was a rent-free period or reduced rent). At the second review the minimum agreed at the first review, at the third review the minimum at the second review; and so on. So, for example, if an uncapped index-linked review increased the rent payable at the second review, then even if the index fell by the third review, the minimum would still be the higher agreed at the second review. It is not only uncapped index-linked reviews, but also cap and collar reviews that increase the rent between each previous review to a minimum rent immediately before a next review. 

2.2.2 Where the upward-only review is to the market rent, the rent at each review depends upon what the parties agree, whether evidence-based or not, subject to the same as the rent payable immediately before the review date, no more, no less. Where an increase is agreed or ascertained, that rent becomes the minimum payable for the remainder of the lease term. If at the next review, the market rent is lower, the review itself is known as nil increase and the minimum rent continues. In practice, the premises become over-rented which can adversely affect the tenant’s likelihood of assigning the tenancy (lease); or sub-letting – if the lease requires any sub-let to be at a rent not less than the rent reserved in the lease. 

2.2.2.1 Nil increase does not mean the market rent is too high: it can also mean the market rent is the same as the rent payable immediately before the review, or that any increase would be so slight as to be not worth pursuing. Not worth pursuing is a matter of opinion. For example, I have clients who will go to a third party for an extra £250 a year. As an increase is indicative of the direction the market for the premises is taking, any landlord concerned about the performance of the investment is unlikely to be content with nil increase. It is important also to note that assuming 10% yield, every £250 pa extra equates to £2500 capital value. For one property, that might not seem worthwhile, but it makes sense when multiplied by the number of properties in the.portfolio.

2.2.2.2 In my opinion, where surveyors go wrong is agreeing nil increase in a memorandum recording the revised rent because that is tantamount to confirming that rent is the market rent. Surveyors generally cannot be bothered to agree the actual market rent because they consider it academic when the rent payable is higher. However, what the memorandum should record is the actual market rent because the rent payable after the review is agreed or ascertained is a separate issue. When acting for a tenant, the advantage of insisting the market rent in the memorandum, even when the rent payable is higher, is that it can cause problems for landlords whose investments are mortgaged and the landlord needs to convince the lender the investment is performing. On occasions, in exchange for agreeing for the memorandum to be nil increase, I have, for the tenant, obtained reductions in the rent payable. 

Whenever I act for a landlord on review to be decided by a third party, I make it clear to the third party that, unless the lease stipulates that the third party is to determine the rent payable, the third party should only decide the market rent. 

2.3 Upward only rent review has been a feature of the commercial property market for decades. As a cushion for landlords, it is a pinnacle of investment finance and mortgage. At the very least, (assuming the tenant doesn’t go broke), the total rent payable throughout the term of the lease will never be lower than the starting rent multiplied by the number of years of the lease term. 

2.3.1 On renewal of a lease, the upward-only cushion is no more. At the start of a renewal lease, the rent would be the market rent (without any index-linking) at the time. So if the market rent then is lower, then the starting rent for the renewal lease would be rebased. In the prevailing market, rebased rents are common. 

2.4 Granting a lease outside LTA54 does not overcome the Bill 2025 proposal. All tenancies that are a qualifying tenancy within the meaning of the Landlord and Tenant Act 1954 Part II are affected by the proposal. (Please note: trying to avoid a business tenancy by calling the document a licence does not make it one. With commercial property, the deciding factor, whether the occupier has exclusive possession, is the law, not the label the parties give the document.) For a lease to be outside LTA54, the parties agree that LTA54 sections 24-28 are excluded – those sections concern renewal rights – but, apart from that, the tenancy is governed by the LTA54.

3.0 Whether market rent only or a combination of market rent and index-linked with a minimum, or a rent geared to the tenant’s business turnover subject to a fixed minimum, and where the rent payable after the review is agreed or ascertained is not less than the rent immediately payable before, and even if the starting rent would be higher, the Bill 2025 is for all upward-only reviews to be unlawful.  So the rent on review could drop below the rent at the start of the lease (or the average above.)

3.1  However, it is not quite as severe as all that.  

(1) The proposal is not retrospective, so existing leases and renewal leases granted before Bill 2025 becomes law are unaffected. 

(2) Leases to be granted after Bill 2025 becomes law are unaffected where an agreement for lease had been completed before that date. 

(3) Bill 2025 is not intended to prevent an increase; it is to remove the floor for preventing any decrease. A turnover-based rent review is okay, provided there is no base rent. An index-linked review is okay, provided there is no collar.  At this stage, it is uncertain whether a geared lease with a minimum base would be banned if the tenant is not occupying for the purpose of a business. 

(4) Bill 2025 only applies where at the review date the rent could not be known or calculated in advance or some other mechanism would render it upward-only.

(5) Bill 2025 does not prevent the parties from agreeing fixed rents at each review when the lease was granted. Such rents would then be known at the review dates.

(6) Bill 2025 does not prevent a fixed rent for the full term of the lease.

(7) Bill 2025 does not prevent an option to extend the term on expiry of the lease at a pre-fixed rent.

(8) Bill 2005 does not require rent reviews to be at regular intervals, let alone at 3, 4 or 5 yearly intervals. Provided it is agreed when each increased rent is payable, a pre-fixed rent or series of pre-fixed rents is a good way to save on legal costs for grant of a new lease and avoid the cost of agreeing or ascertaining an open market rent review. This concept is nothing new and is particularly appealing for long leases to restaurants, nightclubs, hospitality businesses, and the leisure sector.  Subject only to whether the landlord or the tenant shares your imagination, anything is possible, provided it does not fall foul of Bill 2025.

4.0  Before the 1970s oil crisis, leases commonly had pre-fixed increases at regular intervals. For example, a lease for term 21 years had reviews at 7 yearly intervals, each review an increase equivalent to 10% on the starting rent and each subsequent review.  With the oil crisis came inflation in a big way. When I was at school during the 1960s, the talking point about the economy every month was the balance of payments. After the oil crisis, the talking point become the rate of inflation.  More recently interest rates have been the talking point, but inflation is never far away.  

4.1 There is no link between market rent and inflation. But because market rent is subject to the terms and conditions of the lease and comparable evidence includes, but is not limited to, comparison with the lease of the evidence compared to the lease in question, a formula methodology for calculating rent is easier than a valuation opinion of a rent. Typically, leases entitle a third party to decide an alternative index, but a badly worded lease can allow a third party to determine a market rent methodology even where the lease omits the basis for so doing. Even if tenants do not realise that, per case law, they can require a landlord to action a rent review or lose the right to do so, under Bill 2025 a tenant could initiate and force a review regardless. 

4.2 Bill 2025 anti-avoidance renders any agreement void if it purports to require a tenant to make a payment for any difference in passing rent to get around the requirements of the proposal.

4.3 Bill 2025 extends to what is defined as a ‘put option’ which is where a tenant is required to enter into a new lease. Typically, where a lease contains an option to extend the term on expiry of the existing lease, such an option is voluntary, the tenant doesn’t have to. Bill 2025 envisages a scenario where the landlord can require the tenant to enter into a new lease. 

5.0 How tenants react to the proposal will depend upon their bargaining power and importance as an investment covenant. How tenants with lease renewals underway or imminent will respond to proposals that include upward-only reviews remains to be seen. Whether landlords will pre-empt and opt for fixed increase reviews to be more certain of an increase than the risk of an open market review, I would recommend. The market, however, is dynamic, continually changing. What might work one day might not the next day, let alone years later. In most cases, recently, depending upon the whereabouts of the property, a pre-fixed rent increase would have been a better bet than an open market rent. 

5.1 How to compare a lease whose reviews are upward or downward with a lease whose reviews are upward only is the same as existing – a benefit to the tenant that arguably justifies a higher rent.  But if as and when, then an upward-only review would be viewed as a disadvantage. 

6.0 As Bill 2025 travels through Parliament and commentators suggest legitimate ways to circumvent the proposal and as anything else comes to mind, I shall update my analysis.

July 2025. I have just found out that a well-known firm of surveyors has re-hired someone whose reputation is awful. I doubt I am the only one who has been on the receiving end of his nastiness and, so I am told, not the only one who has expressed concern about the re-hiring.

When a surveyor represents a retailer, the surveyor is an ambassador for that retailer. Anything the surveyor says and does represents that retailer. It is the retailer’s decision to instruct and the firm’s duty of care to ensure that the surveyor dealing with the matter complements the retailer’s relationship with its customers.

Multiple retailers might like to imagine that they can afford to lose customers, in the mass market there are sure to be enough new customers to make up the difference. But retailing is fiercely competitive, and social media influential. If a customer has been badly treated or let down, it won’t take long for hundreds possibly thousands of other customers to get to hear about it.

In business, a difference exists between customers and ‘profitable’ customers. A profitable customer is someone who, regardless of the competition and competitors, is loyal to the particular retailer. For example, when John Lewis Partnership went wrong in changing its credit card provider to New Day, it lost hundreds of profitable customers. In my case, for example, instead of JLP being the first port of call for most purchases, it lost 50 years of loyalty.

For a rent review, the parties’ surveyors do not start off by exchanging a list of retailers with whom they are regular customers; that’s personal and irrelevant. But it becomes relevant if something happens during negotiations to make one think do I really want to continue spending money with this retailer if its surveyor is the sort of person the retailer thinks a suitable ambassador. Currently, for example, an in-house surveyor for a group company of the same retailer as the nasty experience 20 years ago has become so aggressive that I am relieved not to have spent any money with the retailer since. Possibly, the surveyor years ago did not think for one moment there was anything I could have done about it. Wrong. I wrote in my newsletter and on my website and by the time the retailer requested enough, thousands of people, including directors and owners of multiple retailers, would have read about it.

The awful situation arose as a result of the surveyor’s emphatic nil increase which, because I disagreed, sparked his tantrum. On referral, an increase. The aggression above because of my refusal to negotiate by an in-house surveyor’s rules.

Fortunately, such experiences are rare. Nowadays, if anything like that were to happen then, as well as writing on my newsletter website and on LinkedIn, I’d report the surveyor to the RICS for breach of core principles. I’d also write to the retailer’s CEO and suggest something be done urgently to stop it happening again.

Jul 2025 – For continuing professional development, Ii was reading about an Act of June 1657 “Annoyance by Buildings.; Fines for Houses built on new Foundations, within ten miles of the Walls of London, since the 25 of March, 1620” (for the preventing the multiplicity of Buildings in and about the Suburbs of London, and within ten miles of the same), becoming interested in the term “rack rent”.

I’d always assumed “rack rent” meant the new full open market rent, but not so. Rather, not the only meaning. According to Wikipedia, “historically, rack-rent has often been a term of protest used to denote an unjustly excessive rent (the word “rack” evoking the medieval torture device), usually one paid by a tenant farmer. The two conceptions… – the other the full rent of a property, including both land and improvements as if subject to an immediate open-market rental review – …of rack-rent both apply when excessive rent is obtained by threat of eviction resulting in uncompensated dispossession of improvements the tenant himself has made. I.e., by charging rack-rent, the landowner unjustly uses his power over the land to effectively confiscate wages, in addition to merely charging the tenant interest and depreciation on the capital improvements which the landlord himself has made to the land.”

I know the origin of “open market rent” which, despite case law deciding “open” is superfluous, might not be. It originates from the bygone era when markets were not open to all.

The history of fairs and markets is fascinating, at least I find it so, particularly for the origin of market towns, the grant of Royal charters, and weights and measures. Generally, it is from market towns that bricks-and-mortar physical shops evolved. Fairs were often for employment, when at harvest time jobseekers would offer their services and afterwards some entertainment. The “mop” in mop fairs was a tassel which successful applicants wore on their head to signify having been offered a job.

Some 30 years ago when. in spare time, I chaired the Ledbury Carnival Committee, I fell out with the fair’s representative over a difference in opinion where I wanted the fair sited and his assertion it had to be in the high street. Searching for another fair, I discovered that under the code of conduct of the Showmans’ Guild, another fair couldn’t come unless the existing fair had resigned. Instead of the fair paying us the usual fee, we hired a children’s roundabout and discovered just how profitable fairground attractions are. The upshot of the fair refusal was that its sub-tenant stallholders were furious with the representative because Ledbury was, apparently, one of the most profitable towns in the region. Even since, the fair has done as told! The blueprint I introduced for that Carnival has also been used ever since by successive committees.

Jul 2025 – Creepy? When you stop to think about it, the RICS is like an episode of Dr Who where an alien beast has a hold over humans that have to do its bidding.

Over 150 years ago, a few surveyors got together to decide their standards were superior to everyone else at the time so to atttract more work that was going elsewhere they set out to compete in what is arguably the only way to undermine the loyalty that would’ve existed between the lesser surveyors and their clients.

Fast forward to now and what has evolved is an organism whose tentacles have such a grip on the property market that the freedom of landlords and tenants to enter into contracts which, provided not illegal or subject to overriding legislation, is curtailed because any chartered surveyor advising must do the utmost to convince the client that what the RICS wants the RICS gets.

Take for example the latest incarnation: an updated PS for service charges in commercial property leases. Unlike residential service charges that are regulated, commercial property service charges are not. A landlord can impose whatever it likes and if a tenant doesn’t like it then tough. Unfair bad bargain agreements are rife in the commercial property market. To redress the balance, this non statutory body imposes its will on landlords by introducing to tenants a gamut of ideas that might not otherwise have been considered in a quest for standardisation regardless. In the same way the European Union is an experiment in socialism that can only work if people give up their national identity, otherwise seemingly intelligent people enlist to become brainwashed clones.

Not content with interfering in the drafting of leases, private agreements between landlords and tenants, the RICS has a monopoly on rents. Its members get to decide what rent landlords should have to accept regardless of the commercial purpose of a rent review which is to keep pace with the changing value of money. So even though surveyors do not make the market but merely interpret it for the benefit for client, a gap often exists between what the open market would pay and what the third party decides. Because unless there is evidence of what the open market would pay, which often there isn’t, the third party errs on the side of caution.

The snag with over-stepping the mark is that there comes a point when market players say enough is enough. To overcome the hassle and cost of renewing a lease, increasingly landlords want the lease outside LTA54. Next in line for the chop is the rent review which is rapidly becoming indexed linked or formulaic.

Give it another 10-20 years or so and the RICS grip will have been loosened; landlords and tenants free to return to their own devices, their advisers “unqualified” academically, instead more than enough experience.

Jun 2025 – Complain… is not something I do very often. Mostly, there’s nothing much to complain about. Specialising in rent review enables considering holistically, not only from the client’s perspective. There are at least two sides to a story. So when I complain occasionally, I always include some suggestions for what can be done to ensure the situation does not reoccur.

I’d like to think my approach is appreciated by the recipient, usually the CEO of the company. I rarely contact customer services. Customer services is a “barrier” whose function is to shield the CEO from getting involved with the public face of the organisation or business. Contacting the CEO direct is much more likely to elicit a constructive response than wasting time dealing with lower levels of pay grades. Long ago, whilst acting for a local trader tenant of a small unit on an upper floor of Lakeside Shopping Centre, I wrote to the landlord’s figurehead director, Baroness x, explained the position and asked for her help. Soon after, instructions from the top unblocked the resistance I had encountered in dealing with the surveyors.

I wish I could say the same of the RICS. Finding the contact details for the President and anyone on the presidential team is difficult. You’d think, at least I would, that an organisation that wants to be regarded as a “centre for excellence” would be outfacing and whose top people would respond to messages either personally or through a personal assistant. Perhaps the scandal in 2019 – involving allegations of suppressed financial reports, mismanagement of funds, a power struggle between senior executives and non-executive directors, which led to Alison Levitt KC (whom the RICS had appointed to carry out a review) in her conclusion that the RICS executive “hid behind the governance structure when it was convenient, but circumvented it for much of the rest of the time” – is continuing?

I should think it very difficult for anyone helping to run a membership organisation whose role in the property market is not statutory. and whose influence is limited to requiring its members to spread the word, to be as customer-friendly as a commercial business.

In most large organisations, change is at a snail’s pace. A rowing boat can turn on a sixpence, a big ship turning circle can be half-a-mile. So as an adviser to landlords and tenants whose interests the RICS wants to serve, despite not having been asked, perhaps I am expecting too much, or too soon, that it would take any notice of anything glaringly obvious that would help improve standards.

Jun 2025 – I am, so much so that since the start of the year I’ve worn 4 layers of clothing on my upper body, including one thermal layer. Most people (including my wife) think I’m mad. Perhaps.

A few years ago, we replaced all the original double glazing with triple glazing acoustic one-way glass – unusual in a private house. Part of the reason was to minimise the sound of our dog barking to the outside world. Unlike dogs that win competitions so that their owners can proudly display cups on the mantlepiece, our dog has a collection of complaint letters from the council and anonymous letters from nearby residents. Considering she’s only doing her job by barking, I thought it was wrong she should be told off – even if it was at 3am. As a gesture of goodwill to the people opposite that no longer talk to us following that incident, now whenever they look out of their windows toward the front of our house, all they can see is a reflection of them themselves. (Time-saving tip: do not talk to your neighbours!)

Something I didn’t allow for but which has saved on heating bills is that the interior temperature is consistent. During the heatwave, the indoor temperature is cool and pleasant, with no sense of how hot it is outside. So on Friday last, when I went outside for longer than the usual 20 seconds or so daily walk to the wheelie bin and back, it fascinated me how many people I saw not wearing as many clothes as usual.

Body temperature in the range 97 to 99 F can vary with age, activity level, time of day, and other individual factors. In my opinion, the reason so-called normal people feel hot in hot weather is food and drink. Sweat is the body’s way of cooling when we are dehydrated. Top-up with water? A good way to overheat the body permanently is to drink coffee, tea, alcohol, eat chocolate, crisps, ice-cream, added sugar. Any food and drink, typical of the Western high acidity diet, that causes the body to work harder to maintain the pH alkaline-acid balance takes its toll on our innards. Removing clothes to cool down is not the answer if the cause of feeling hot is also not addressed.

Scientifically proven? No idea. I’m a fan of science, up to a point. When you rely on science, remember scientists rely on funding, often provided by the same companies whose products are under scrutiny. For me, it’s what makes sense. A wholefood organic vegetarian for more than 40 years, for the past few years more alkaline and since last year, thanks to Chris van Tulleken, no ultra-high processed foods, I’m not expecting anyone to follow my example: what you eat and drink is your choice. All I would say is that the cumulative effect of a high acidity food and drink regime over the long term is a cause of mental stress, aches and pains and a host of ailments that attack your immune system until one day your bodily systems have to choose between maintaining your longevity naturally and protecting you along the way from self-inflicted harm.

Jun 2025 – On referral, win most, lose a few; fair enough when the third party is someone who knows what he/she is talking about. But it irks when someone doesn’t.

One such today. For no apparent reason, the RICS appointment of an IE was, according to the surveyor’s website, an arbitrator and mediator. As if to make a point, after accepting the appointment, when the parties had no choice and couldn’t object, the person sent the parties a CV which would be impressive for an arbitrator. Why the person accepted the appointment is beyond me.

Not only did the person suggest costs could be decided when the lease clearly states each party is to pay 50%, but also the valuation has been based on the RICS valuation standards definition of market rent even though anyone experienced of rent review for a commercial property knows that the definition of market rent depends upon the lease in question. And as for the costs, it wouldn’t surprise me, inflated through lack of involvement in the market. That and including irrelevant paragraphs in the determination as if to pad and, albeit not obliged to give reasons, the reasons given did not include the most important why the determination. Charging £360 an hour to merely repeat what the parties have said is a rip-off.

In 2010 and again in 2015, the RICS DRS panel service agreement for commercial rent Independent Experts required regular assessment ordinarily at 5 yearly intervals unless triggered, among other things, by adverse feedback or lack of regular market involvement in stated areas of expertise. IEs had to update the DRS on their market involvement every 2.5 years with details of experience. For skills, the expert had to be recognised in the marketplace as actively involved.

In 2024, the criteria for a RICS DRS panel appointment as an IE is seemingly more flexible, allowing presumably for the shortage of IEs with particular skills, experience, and/or geographical areas. The property in question is in London, where I would think no shortage of IEs with experience of shop lettings, but while I’d never heard of this person, which in itself doesn’t matter because at least when checking up, the credentials do not give me cause for concern.

In an era of transparency and accountability, I consider the RICS, with its virtual monopoly of third-party appointment for rent disputes, should re-think. An IE should be required to give reasons for a determination by default, unless both parties object. Costs should be limited to a percentage of the passing rent on a sliding scale commensurate with the. rent. An IE should only be appointed if actively involved with leasing transactions in the same market as the type of property in question.

I am going to do something I’ve never done before, and that is to make a formal complaint to the President of the RICS and the RICS DRS that this person should never be appointed as an IE again. In my opinion, the RICS DRS has made a terrible mistake in allowing this person to be an IE. The sooner nipped in the bud, the better.

Jun 2025 – Hardly a week goes by when yet another report is published on some aspect of the market, trends, and so on.

Sometimes a client will provide me with a report published by a trade organisation, or a survey of comments by local businesses, and such like, regarding the state of the market at the time. Another source is research reports produced by leading commercial property agents.

Unlike the client who in most cases has only read what is relevant to the client’s needs, I also read the report author’s methodology.

In the same/similar way that advertisers say that 8 out 10 people prefer ‘x’ which might sound impressive – until the claim is investigated and finds that just 75 people were asked for their opinion – such reports are normally generalisations and of no assistance whatsoever for the rent review. One might think that an inexperienced party can be forgiven for thinking otherwise, but surveyors are also ‘guilty’ and on referral will pad reports with pages of irrelevancies in the hope presumably of convincing the third party that what might be happening in the market generally should apply to a particular property in a particular town.

In my opinion, such generalisation is in the same league as reasoning, as inexperienced parties do, a direct link between Rateable Value and their rent. It doesn’t help that the VOA, in explaining how the RV has been arrived at, says the market rent of the premises (and in many instances the first zone depth 6.1m (20 ft) when actually in some places it is 4.572m (15′) or 9.144m (30′). Not only is the assumption for rating valuation different from rent review, but also per R v Paddington Valuation Officer and Another Ex parte Peachey Property Corporation Ltd 1965 there is no correlation between Rateable Value and actual rent.

Throwing enough mud at the wall in the hope that some of it will stick adds unnecessarily to third-party costs on rent review. Especially if the third party has to travel miles away to inspect the property merely to confirm first thought. In my opinion, surveyors generally overcharge for reports/submissions to third parties as is, without adding to the costs to justify their fees.

Jun 2025 – In Darwall and another v Dartmoor National park authority 2025, a ruling by the Supreme Court about the public’s right to camp overnight on Dartmoor is interesting comment about statutory interpretation, following on from Pepper (Inspector of Taxes) v Hart 1992.

The normal principles of statutory interpretation are to ascertain the meaning of the words used in a statute in the light of their context and the purpose of the statutory provision. In Pepper, the House of Lords established that the courts can, in certain circumstances, consider statements made in Parliament (specifically, in Hansard, the official record of parliamentary debates) when interpreting ambiguous or obscure legislation.

The principal legislation for lease renewals is the Landlord and Tenant Act 1954 Part II (as amended). Subsequent amendments are the Law of Property Act 1969 [interim rent]; Landlord and Tenant (Covenants) Act 1995 [privity of contract], Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 [s24-28 exclusion / outside the Act]; Small Business Enterprise and Employment Act 2015 [home business] . As far as I am aware, there hasn’t been any need for statutory interpretation of the Acts and Order, but a considerable body of case law exists for interpretation arising out of the application of the legislation on qualifying tenancy expiry and renewal.

Currently, the Law Commision is consulting on reform of the LTA54 Part II. To date, it is likely that the Act’s model of secuty for qualifying tenancies will be unchanged. Also that the existing 6 month tenancy exclusion from the Act may be extended to about 2 years.

Jun 2025 – Key Flats was the public name of the London and County Freehold and Leasehold Properties Company Ltd, a residential property landlord, incorporated in June 1909 whose assets then valued at circa £300,000 and which by 1945 had grown to £10,000,000. 

It was 1945 because I have a booklet from then titled “Where Shall We Live” containing photos of all the company’s properties, details of its 8,000 flats, including number of rooms, amenities (hot water, central heating, passenger lift), and annual rents. For example, an 8 room flat in a block in Baker Street, London W1 could be had for £325 a year. 

As luck would have it, while searching online for what happened to Key Flats, only to discover the company, at one stage a link with. MEPC (1946) Ltd, was liquidated voluntarily in 2024, I found a website for a company that owns the ex-Key Flats blocks in the London NW3 (Hampstead) area, and whose balance sheet is net asset value approximately £5M. A gesture of goodwill, I have sent them a copy of the pages for that portfolio with all the rents. 

i find it particularly interesting from some of the photos is the easy free on-street parking and the cars themselves. I wonder if at that time anyone envisaged that on-street car parking in central and inner London suburbs would be pricey, or that it would cost £20 a day to drive in Central London. Or that nowadays a flat in Baker Street would fetch approximately £850 a week.

Jun 2025 – News that Hammerson have bought Standard Life’s (Abrdn) 95% interest in the Brent Cross Shopping Centre in NW London and are now working on buying from another a further 3% interest so as to own 100%, led me to read about the Centre on Wikipedia.

I know a lot of about BCSC already, having been on the Montagu Evans & Son planning team for the public inquiry for planning consent. I do not know who wrote the entry on W, but it omits material information. It’s true that Hammerson developed the Centre, but I wouldn’t agree that it was on undeveloped land. And I wonder if it was the “first out-of-town and American-style indoor shopping centre in the country”. Moreover, there’s no explanation for why called the Brent Cross Shopping Centre.

For why called, a plausible possibility is that it’s in the London Borough of Brent. Except it’s not, it’s in LB Barnet. And why the Cross? A cynic might surmise that because the BCSC ruined Golders Green Road, the primary shopping for the area, from which GGR has never recovered, the local shopkeepers were cross. But no. Originally, the cross road was the junction of the North Circular Road and Hendon Way.

The land upon which the BCSC was built is between the River Brent and the North Circular Road. Unlike the South Circular Road, which for decades was a series of local roads knitted together, the North Circular Road (A406) is a 25-mile road, from Chiswick Roundabout (Flyover) to North Woolwich- a ring road around London north of the River Thames before the M25 was built. In its day, the Ace café, by the viaduct at Stonebridge Park, a haven for bikers: 100 mph late at night.

The land was, in my view, not undeveloped as such because, in 1935, it was a greyhound track, owned by Hendon Stadium Ltd. After the War, Hendon and Hackney Wick merged to become Hackney and Hendon Greyhounds Company Ltd. In 1970, businessman George Walker, brother of boxing champion Billy Walker, did a reverse takeover and the merged company was called Brent Walker Ltd. In 1972, the stadium closed, and the site was sold for the building of BCSC, with some of the land forming the new links to the M1 motorway and the rest as parking spaces for the new shopping centre.

As for the first out-of town American-style centre. Sort of. In 1964, the first edge of town superstore, 110,000 sqft in 50 departments, under one roof, aimed at motorists and families, was in West Bridgford, Nottinghamshire, developed by Gem International Supercentres Inc., to bring American shopping habits to Britain. A drive in, load up, drive out, It was too far ahead of its time, as then only 47% of the population had refrigerators. It lasted 2 years before sold to Associated Dairies. Keen to take advantage of the law banning retail price maintenance, Asda wanted to create a large-scale, low- price superstore.

Jun 2025 – In July 2003, Allsop auction, Lot 34, Mr X bought a shop investment 52/54 High Street, Hucknall, Nottinghamshire. An attractive prominent building let to Boots at £28,250 pa, he paid £610,000. The seller, Golfrate, had served notice for the March 2003 review proposing £43,000 pax.

Something I advise landlords when buying at auction is to ask “who’s selling, and why?” Inexperience doesn’t think the answers matter, so carry on regardless. But those of us who know what we’re talking about, know there’s a catch when the seller is an experienced professional landlord. To the question, “what’s the catch?” the answer is “you are.” Anyhow, I wasn’t consulted by Mr X beforehand, so what transpired was his own fault.

The wording for the rent review was unclear and ambiguous. Boots were adamant an upward/downward review. Mr X, presented with Boots’s offer of £20,000 pax and refund the overpayment, instructed his solicitors to advise. The solicitors recommended my services. To avoid litigation and costs, Boots Calderbanked at £22,500 pax. To cut a long story, I persuaded Boots to agree no reduction in the rent, so nil increase. Mr X refused to sign the Memorandum. Also, he did not pay my fee so I issued proceedings in the small claims court. To my suprise, Mr X defended the claim. We agreed to go to mediation but the court couldn’t find a mediator. I needed to amend the claim. I contacted the court office and was told to write a letter. The court rejected my letter, saying it wasn’t an application, so reluctantly I paid some more costs for the application. After that nothing; the court had mislaid the papers. I gave up. Fortunately, the number of bad debts I have endured over the years are very few.

In February 2024, Lot 39, Allsop again auctioned the freehold. In April 2023, Boots had renewed for 5 years at £24,500 pa (lower than before), with TB in 2026. The reported sale price was £290,000. In June 2025, Allsop auction again, Lot 58, the reported sale price £322,000.

In the 21 years Mr X owned the freehold, the rent, excluding costs and any other non-recoverable expenses, had just about covered the purchase price. Getting out for £290,000 before costs a bonus. Why the property was resold this month I can only guess at something to do with Boots break right next year.

In July 2003, Allsop and the seller both warned prospective investors to think twice about bidding. By clearly stating at the top of the auction catalogue lot page “On Instructions of Golfrate”. That’s the thing about the inexperienced, they don’t understand the significance.

May 2025 – A silent war is raging between tenants and landlords.

This commercial purpose of a rent review, according to British Gas Corporation v Universities Superannuation Scheme (1987), and Equity & Law Life Assurance Society plc v Bodfield (1987), is to keep the rent in line with current property values having regard to the current value of money.

So a rent review to open market rent is only fit for that purpose if the methodology for the open market rent is supportive. Ideally, the open market should be tested but, as the tenant is in occupation, that is not allowed. Instead, a hypothetical scenario assumes that a market exists and that it is not necessary to identify who would want the premises, only to know that someone somewhere would. 

The question then arises as to what rent this hypothetical tenant would agree? It is reasonable to assume it would not be less than a hypothetical landlord would agree. But, nowadays, according to surveyors when acting for tenants, the answer is the same as the passing rent and only as much as that because the rent payable after the review is agreed or ascertained would not be lower than the rent payable before the review.

Which means that such surveyors are acting for the actual tenant, not the hypothetical tenant. Their stance is subjective, not objective.  This is all very well in negotiations for amicable agreement. After all, if the actual tenant succeeds in convincing the landlord to concede, all well and good. 

It is, however, unacceptable on referral. The overriding duty to the ‘tribunal’ is for a reason. It is to reinforce the need to be professional, to be objective. So the surveyor has a conflict of interest: on one hand, to do the client’s bidding, on the other to be objective.  As the French would say, good idea in practice, but will it work in theory? No –  the client is more important. I regret having to say this but, in my experience, most chartered surveyors I’ve encountered on referral fail the test of integrity:  their opinion would not be the same if acting for the other party. 

It is costing landlords a fortune having to go to a third party to get the message across.  It is also costing tenants to defend. The contest ruins the landlord and tenant relationship and tarnishes chartered surveyors, whose virtual monopoly for professional work makes them sitting ducks for criticism.

This war is wrong on so many levels.  It’s obvious that most surveyors don’t care. Why should they? It’s not their property, not their risk, not their money. Except it is their problem – because the more landlords that are aggrieved, the more tenants that cannot get what they want, the more likely they will never instruct an external surveyor again. 

May 2025 – For pre-contract enquiries, nowadays known as Commercial Property Standard Enquiries, “CPSE” for short, any temptation to answer most with ‘no’, or ‘not known’, or ‘not aware of’, is bound to be a waste of time. The person enquiring is sure to query anything that should be answered more fully. 

The information about the property that the seller or landlord is expected to know can be daunting. Some questions are so technical as to be unintelligible for the inexperienced. 

One such enquiry that can be difficult if not impossible to answer is whether any non-structural alterations have been done to the property. If the landlord has done any, then answering should be straightforward. But what if the previous tenant, or the existing tenant if the new lease is to be granted on simultaneous surrender of the existing lease, did the work without needing the landlord’s consent, as many leases allow? And what if the existing tenant is an assignee of the previous tenant? Would the previous tenant have had to tell the existing tenant? 

Where alterations are carried out by a tenant, not in pursuance of an obligation to the landlord, any effect on rent of the alteration (improvements) will often be disregarded for the rent review, depending upon the wording in the lease. On renewal of the lease, it is essential that, for the rent review in the renewal lease, the review expressly disregards the improvements under the previous lease, failing which the alterations become part of the demised premises for the renewal lease – Brett v Brett Essex Golf Club 1986; Panther Shop Investments Ltd v Keith Pople Ltd 1987.

Unlike for agricultural property, which includes intangibles, there is no definition of ‘improvements’ for commercial property. Generally, it is taken to mean a physical improvement. Non-structural alterations, also physical improvements, are not always inconsequential. 

For example, where shop premises are fitted out as a takeaway hot food shop, a typical non-structural layout is a serving counter at the front of the shop with space between the shopfront and counter for customers to stand and perhaps sit at a table while waiting, and behind the counter, tiled non-structural walls for the kitchen, preparation areas, and staff. Not requiring the outgoing tenant to reinstate the premises before letting to a new tenant means that the layout previously becomes part of the demised premises under the new lease. 

For that scenario, I acted for a tenant for whose rent review the landlord’s surveyor wanted to ignore the layout and zone the shop as if the non-structural walls were not there. I successfully reasoned that, on grant of the lease, the layout of the premises was as existing so the rent had to reflect the disadvantages. 

I used the same reasoning for another tenant. There the landlord’s surveyor’s conceding nil increase was perhaps why at the next review he was not re-instructed, instead the landlord’s solicitor’s sought a nominal increase which I resisted. And thereafter, five years later, yet another representative of the landlord had a go at trying to defeat my stance. 

May 2025 – Currently, I am acting for the landlord of a property whose upward-only review is to the greater of the market rent and uncapped index-linked. The dispute procedure is an independent expert. My client is not the original landlord, he bought the property at auction, but the tenant is the original tenant.

The tenant cannot afford the increase. His reasoning is that when the lease was granted, about 5 years ago, inflation had been low and no one could’ve predicted it would increase substantially. He asserts the index-linking was a fair and typical method for the rent review. He is adamant, if the landlord won’t agree to a lower rent in line with what the tenant can afford, then an IE would be sympathetic and reduce the rent. And if need be, the tenant would go to court.

My client isn’t interested in agreeing a lower rent, he isn’t obliged to.  I have told the tenant that index-linking is commonly used where open market evidence is difficult to find or is unsupportive, and the landlord wants an increase regardless. The tenant wasn’t under duress, he could have sought a capped index-linked or not taken the lease if the landlord had refused.

I have informed the tenant that an IE doesn’t have the authority to determine a lower rent, although under the lease the IE’s authority includes determining an alternative mechanism – which I take to mean a different index. I’d be amazed if an IE would prejudice impartiality and reduce the rent out of sympathy.

Uncapped index-review are not uncommon. Plenty of tenants have been caught out by the increase in inflation. I also have tenant clients concerned.

Understandably, the Tenant’s reasoning is subjective.

A business tenancy is a commercial contract, the parties are deemed to know what they are doing. A doctrine, “freedom to contract”, means that the parties can agree to whatever like provided it is not illegal. Despite the presumption of reality and business common sense, the courts will not re-write a bad bargain.

For case law, I have found 9 rulings, all in favour of the landlord. For example, in Rainy Sky SA and others v Kookmin Bank 2011, “The role of the construct, the reasonable person, is to ascertain objectively, and with the benefit of the relevant background knowledge, the meaning of the words which the parties used. The construct is not there to re-write the parties’ agreement because it was unwise to gamble on future economic circumstances in a long-term contract or because subsequent events have shown that the natural meaning of the words has produced a bad bargain for one side.  The question for the court is not whether a reasonably and properly informed tenant would enter into such an undertaking. That would involve the possibility of re-writing the parties’ bargain in the name of commercial good sense”.

Mar 2025 – A director (according to Practical Law) is “a person elected by the members of a company or otherwise appointed to superintend the management of the company’s affairs. Although company directors are not strictly speaking trustees, they are in a closely analogous position because of the fiduciary duties they typically owe to the company.”

In my opinion, what a director is not is someone who clearly isn’t a director in the true legal sense, but has been given a pretentious title so as to give the impression to the outside world that the person is somehow more important than he/she is. 

Some years ago, a chartered surveyor so-called director of Savills made a remark in an email to me that I decided was offensive, so I made a formal complaint to the RICS. As you may know, the RICS doesn’t deal with complaints. Instead, it refers the complainant to the firm concerned to resolve. So I wrote to the proper CEO of Savills. One of his colleagues, in his apology, confirmed that the so-called director wasn’t a proper director and wasn’t authorised to make executive decisions. The so-called director also apologised and that was that. Later, when I informed the RICS of the outcome, the RICS again wasn’t interested. 

I am a non-executive director of a limited company whose two directors are a commercial property agent and a chartered surveyor. I am also the director of two different unrelated limited companies. So if I wanted to boost my standing in the outside world, I could legitimately call myself a director. (I am also a Life Member of the Institute of Directors.) 

Currently, for a rent review referral in which I am acting for the landlord, I am drafting my Reply to the tenant’s expert witness (“EW”) chartered surveyor’s Report. In his Report, EW says he is a director of (company name). So, naturally, I checked on Companies House and he isn’t. Therefore, it’s a lie which immediately contradicts his Statement of Truth.

I suggest that executive directors of firms of surveyors, whose habit of dishing out fancy titles that misrepresent their legal status, should remember that there are people in the real world who, when they want to know with whom they’re dealing and what they’re up against, would, as I do, check whether what they’re being told is true or a lie.

Feb 2016 – At rent review, the phrase ‘going to arbitration’ is often bandied about during negotiations as a means for one party to get its own way. 

Whether or not the parties can agree the rent without involving the dispute resolution procedure, it is common for a represented or experienced party to invoke as a negotiating ploy. For whatever reason, it is important to understand what you are letting yourself in before taking the step or allowing the procedure to run its course.

Some of what I am about to explain is taken from ML Guide – Arbitration at Rent Review: the Landlord’s Perspective – which you can read on my website at 

At rent review, there are two methods of dispute resolution to a third party: (1) arbitration; (2) a surveyor acting as an expert (known as an independent expert). Whether you would have a choice and the riming for a decision depends upon the wording of the lease: generally, a lease will state one method only. 

Although the referral procedures are similar, the role of the third party is completely different. In outline, the main difference between arbitration and independent expert is that an arbitrator is bound by the rules of evidence and the award (of rent) cannot be more or less than the rental extremes submitted by the parties. An arbitrator is expected to use expertise in assessing the relevance and quality of evidence and arguments and can make his own enquiries, but contentions must be proven, either from fact or experience. 

An independent expert, however, can make up his own mind regardless. An independent expert is an impartial surveyor-valuer whose opinion (determination) of rent the parties have covenanted to accept. 

An arbitrator’s authority is derived from the Arbitration Act 1996; an independent expert’s authority is derived from the actual lease. An independent expert is simply a valuer, so may be sued for negligence. An arbitrator cannot be sued for negligence but, provided a written reasoned Award is given, appeal can be made within 28 days on points of law or for irregularity, such as misconduct.

From now on, except where stated, to avoid repetition, I shall refer to the arbitrator or independent expert as the “person”.

Whether acting in the capacity of arbitrator or independent expert, the person is an independent, unbiased, and emotionally detached person whose jurisdiction and powers are governed by, for an arbitrator, the Arbitration Act 1996, and for an independent expert by the actual lease itself. 

Every lease is different, so the appointment procedure will vary. Usually, the referral is to a surveyor, expressly or implied a chartered surveyor. Older leases may require the appointment to be made by the President of the Law Society, or the Chartered Institute of Arbitrators, or a local Chamber of Commerce. Generally, modern leases require a person to be a (chartered) surveyor appointed by the President of Royal Institution of Chartered Surveyors (RICS); some leases enable the parties to agree and appoint a suitable person as a precursor to RICS application. 

Depending upon what the lease says, it could be required that the person would be familiar with the area in which the property is located and/or experience of the type of premises. In any event, the person must have no involvement with either party, unless agreed or any conflict of interest disclosed and accepted beforehand. Assuming the appointment selection procedure is administered by the RICS, either the landlord or the tenant, or both, may apply to the RICS, depending upon the lease. The applicant pays an administrative fee to the RICS, currently £395 inclusive of VAT – (in 2025, £425), for the appointment and undertakes to be responsible for the person’s costs. 

In the past, it was possible to influence the RICS’s selection process by listing, by reason of conflict of interest, names of person(s) likely to be sympathetic to the interest of the other party: (landlord- or tenant- bias). Following case law, the applicant must now show good reason why any particular person(s) should not be appointed.RICS selection procedure takes 2-6 weeks, depending upon the availability of an impartial person. 

On appointment, the RICS writes to both parties to confirm the appointment or nomination and name and address of the person. Previously, the applicant would include a copy of the lease with the application form, but nowadays, the copy lease has to be provided by one of the parties direct to the person. I am unsure of the reason; I guess to reduce RICS admin. Whether the dispute procedure should have been initiated at all or by whom is not something with which the RICS would get involved. The RICS simply processes the application. 

It is possible to halt the process if the review is agreed before the person’s identity is disclosed by the RICS to the parties, but unlikely for the application fee to be refunded! Whether half the RICS application fee would be payable/reimbursed by the other party depends as regards an independent expert upon the lease, or in the case of an arbitrator the award. 

On referral, costs are an issue. Each method has its own rules. There is no overriding scale of charges, each person has their own basis. The amount of rent involved is often of no consequence. Costs can end up disproportionate to the amount of rent involved. Generally, the person will charge based on an hourly rate, or with an independent expert sometimes a percentage of the difference in opinion of rent contended by the parties (an approach that can be great fun to reason over when one or both parties do not proffer any opinion). Generally, I find that the person’s hourly rate ranges from £250 to 350 plus VAT and disbursements/travelling costs.

I have not (yet) encountered requests for payment in advance on account, but that may be a reflection of my reputation; I think reputable advisers would be expected to have honourable clients. Sometimes, the person would charge a fixed amount where the matter is agreed without much of the person’s involvement. In some cases, a person will agree to cap their own costs at a pre-agreed figure. Some arbitrators, particularly in London where apparently money is no object, can run up a few thousand pounds for not much more than a preliminary letter and a few reminders. I have encountered some arbitrators who, despite being informed by both parties the matter is settled and to take no further action until they hear from the parties, continue to send reminders for progress and wrack up more costs because they’ve decided unilaterally the parties are taking too long to complete the matter. 

Since a person cannot usually accept instructions from other landlords or tenants in the vicinity, the person is effectively denied the opportunity for new business, so maybe there is some merit in the parties having to pay extra, even though that presupposes new work coming the person’s way in any event. Greedier persons tend to be a law unto themselves! 

Contrary to popular belief, each party does not necessarily pay half the costs. With arbitration, costs are not only those of the arbitrator, but also the costs of the parties’ surveyors, lawyers, etc. Per the Arbitration Act 1996, an arbitrator is empowered to award costs of proceedings and jurisdiction overrides the lease. If the lease says each party is to bear half the costs and/or half the fee payable to the RICS for the appointment of the arbitrator, then whether such requirements are observed is entirely within the arbitrator’s discretion. 

Since an independent expert’s authority is derived from the lease, whether the independent expert’s jurisdiction extends to the parties’ responsibility for his costs as well as the parties’ own costs depends upon the particular lease. For leases that are silent on the matter of an independent expert’s costs, the applicant party would be responsible for the whole of the independent expert’s costs, with no right of recovery of any share from the other party. Frankly, I consider the omission of responsibility drafting ignorance/experience, in any event inequitable; I await a test case. 

An appointment is personal to the person. Often, the person will be a principal or partner of a firm of surveyors, either based locally, regionally or nationally depending upon availability and the RICS selection, and the type of property and/or requirements of the lease. On appointment, the person will write to both parties to ask if more time is required for negotiation or whether directions for conduct of the proceedings should be issued. The person will also confirm the basis of costs. To ensure and maintain impartiality, all communications to and from the person are sent to both parties. No ‘without prejudice’ communications during negotiations beforehand must be disclosed to the person. When ‘without prejudice’ communication is disclosed, inadvertently or in attempt to influence, the onus is on the other party to draw the matter to the person’s attention so that the person knows to avoiding seeing it.

The procedure adopted by an independent expert is usually along the same lines as for arbitration, despite having no basis in law. In theory, presupposing no procedure stated in the lease, an independent expert could simply go ahead and determine the rent. In practice, that would be unusual. What independent experts prefer is to invite the parties to make written representations/submissions – often, terminology is casual or muddled – whereupon the independent expert will send a copy of one party’s submission to the other and invite counter-submission. 

Having received all ‘submissions’ the independent expert will inspect the premises and, subject to wanting clarification of any matters arising, will proceed with the determination that would then be released, subject to prior payment of his costs. Prior payment for release/publication is normal: one party can pay the whole amount or a moiety. Where the independent expert is authorised to determine costs, often the determination in two stages: the first on rent, the final determination on costs. The costs determination would follow the similar procedure as with the first determination. Whether an independent expert would provide a reasoned valuation depends upon the requirement of the lease or the independent expert’s discretion. Where appropriate, the person requests a Statement of Agreed Facts. The Statement contains common ground, that is, matters concerning the property and lease that are not in dispute; it can also include evidence. Since a SOAF is a binding contract, I consider it important to include a suitably worded exclusion. For arbitration, broadly the same procedure as for independent expert is adopted, except that where one or both parties are represented by advocacy there may be a third date in the procedure for further examination. 

I find the easiest way to explain what happens as follows: assuming arbitration and assuming both parties represented by surveyors. The landlord’s surveyor and tenant’s surveyor respectively will act either as expert witness or advocate or a combination of both, provided the surveyor makes it clear at all times in which capacity he/she is acting. For expert witness, the terminology is ‘report’ and ‘points of reply. For advocate, ‘submission’ and ‘counter-submission’ and ‘further examination’. After the preliminaries have been sorted, the person issues directions for the conduct of the proceedings, with timetable closing dates for the various stages. Most referrals are undertaken between the person and the respective parties’ surveyors. Whether one party is called the claimant or defendant depends upon the person. The formality and terminology can be more lax than if lawyers are also involved. Generally, referrals are in writing only, but an oral hearing can be included depending upon the complexity of the review. The overriding duty of an expert witness is to the judicial body/tribunal – namely, the arbitrator – regardless of the party paying the expert witness fees. An expert witness task is to provide an impartial honest opinion (valuation) of rent, amongst the tests of integrity that the opinion would be the same if acting for the other party. An expert witness is indifferent to the outcome. 

Following criticism by the court of surveyors acting as expert witness entering into the arena to argue the client’s case (advocacy), the RICS issued a mandatory practise statement for representative surveyor on referral. Rather than limit the PS to arbitration, it includes independent expert determination. Many chartered surveyors are somewhat ‘sniffy’ about advocacy, preferring to act as expert witness. Consequently, what normally happens is that since the surveyor that acted in the negotiation will likely reason the party instructing something afresh adds to the costs unnecessarily, that same surveyor will also act as case manager for the referral preliminaries and thereafter when the referral is underway also act as expert witness. Whether realistic for the ‘surveyor-ex-negotiator’ to emotionally detach from the client’s expectation and do as expected of an expert witness is a challenge. It can be done and I do it. [I’ve created a method that combines the best of both worlds and which I’ve used successfully on every occasion for clients, but how I am not going to explain!]

A ‘submission’ – I use the term loosely – is a rarely just a few pages long. Generally, my submissions run to 15-20 pages, counter-submissions similarly, and excluding exhibits. Approximately 10,000-30,000 words is typical and takes me a day or two to prepare and write. I wouldn’t go so far as to suggest the detail required puts writing a PhD into the shade, but possibly not far off. In a case last year, I submitted 900 pages. How long a referral takes depends upon the efficiency of the person, the availability of personnel, and the complexity of the review. For a relatively straightforward referral, I estimate approximately 4 months: 2-4 weeks for the RICS selection process, 2-3 weeks to sort out and agree preliminaries with the person, 2-3 weeks to first closing date, 2 weeks to next closing date, another 2 weeks to third closing date where involved, 2-3 weeks for the person to inspect, and ignoring any other matters arising, 2-3 weeks for the person to confirm the award/determination is ready for publication, subject to prior payment of the person’s costs; allow another couple of weeks for payment. 

On costs, a party’s costs can be protected by what is known as a Calderbank offer. I am not going to explain what that means here, it’s a subject in its own right, so I’ll do so at another time. Suffice it to say, a Calderbank is a ‘without prejudice’ offer to accept to avoid the costs of referral. A Calderbank offer will only have efficacy when the phrasing of the offer and the costs provision in the lease are supportive. 

Apart from exposure to the procedure, or taking a back-seat and leaving everything to your surveyor to deal with, something you are letting yourself in for is loss of control of the outcome. Negotiations are subjective: regardless of the valuation guidelines in the review clause, the parties can agree whatever rent they like. As soon as referral takes over, the review is wholly objective, the strictures of the valuation guidelines in the lease paramount. It is important, therefore, even if you instruct a surveyor to act for you, to have an understanding of the process. Whether necessary to instruct a surveyor is a decision, too. Generally, it is advisable. With arbitration, you cannot leave it to the arbitrator to decide. An arbitrator can proceed ex parte, but not advisable. With an independent expert, you could leave it all to independent expert, but again not advisable because are not going to be able to draw attention to whatever you think the arbitrator or the independent expert should take into account; it would be wrong to assume the person would consider every possibility. An experienced, competent surveyor on your side would be able to influence the outcome. As a negotiating ploy, the threat of referral may work, but has more chance of succeeding when an application is actually made to the RICS. At each stage of the referral procedure, it is possible to agree if the other party is willing. 

Referral concentrates the mind and actual costs can be contained, perhaps under £1000/2000 ex VAT shared by the parties. With a rent review at 5 yearly intervals, an extra £500 (ignoring VAT) on costs equates to £100 a year. It might also be the only way to get the other side to agree to an increase. For example, for a review I dealt with recently, the multiple retailer tenant’s surveyor was adamant of nil increase, negotiations dragged on for months getting nowhere. As soon as the referral was put in motion, agreement was reached for just over 10% more in rent, an increase in capital value of the landlord’s investment of some £50,000, and the referral cost about £500 ex VAT. 

Re-reading the above, it is perhaps a tad simplistic. On referral, there are permutations to consider, as well as the psychology involved. Even so, I trust you get the gist.

A “demise” or “lease” is the grant of a right to the exclusive possession of land for a determinate term less than that which the grantor has himself in the land. A lease is therefore a species of conveyance, and it is provided by s (2)05(1)(ii) of the Law of Property Act 1925 that the word “conveyance” in that Act includes “lease” unless the context otherwise requires.

The word “lease” may be used, however, to refer either to the grant of the right or to the right itself, namely, the term vested in the grantee. A leasehold interest, or a term of years absolute is one of the two categories of legal estate capable of being created or of subsisting in English law. Although a lease is created by contract, it results in the creation of an estate (or status) which can exist independently of contract, at least in so far as the obligations created by the lease touch and concern the land. Thus a leasehold estate may subsist even though the original tenant has ceased to be contractually liable to perform any of the obligations contained in the lease. “The contractual obligations which touch and concern the land having become imprinted on the estate, the tenancy is capable of existence as a species of property independently of the contract.”

In the relationship between landlord and tenant, the landlord owns the building and the premises demised to the tenant is the whole or part of the building. The tenant leases the demised premises (or premises) and the legal relationship between landlord and tenant is based upon the terms and conditions of the lease. The terms and conditions are often described as provisions.
The terms and conditions of a tenancy are embodied in a document, known as a ‘lease’. Although the word ‘lease’ is commonly used, actually the lease is the document, the type of occupancy either a tenancy or licence. I use the terminology ‘lease’ loosely, because the terms and conditions of a licence are also in a document, but calling a document a ‘licence’ does not make it one.

Dec 2013 – On expiry of a business tenancy that qualifies for renewal rights per the Landlord and Tenant Act 1954 Part II, (“LTA54”), and where the landlord is not opposing grant of a new tenancy, it is common, when the tenant wants to renew, even if negotiations are not underway, for the tenant to request the landlord’s agreement to defer application to the court before the end date in the notice, so as to minimise costs of procedure. (Whether costs are minimised would depend on how much solicitors and/or surveyors charge for arranging deferment. When I negotiate a renewal, I arrange deferment where appropriate and rarely charge any extra; all part of the service!)

For both parties, and regardless of whether any dispute could be resolved without the court’s intervention, LTA54 procedure involves litigation, so deferment stops the court becoming involved and taking an active interest in the matter. But, whether minimising cost is a good idea in the context of the wider consequences for either or both parties is another matter entirely.

For the landlord, an advantage in refusing deferment is that it forces the tenant’s hand. A snag with having to state in the s25 notice the landlord’s proposals for the new tenancy is that the tenant can consider them in the light of what else is and becomes available in the market and bide its time. Whilst there is nothing to prevent the landlord from making the application to court, so as to accelerate the tenant’s decision, not only would that require the landlord to incur extra costs, (not something landlords are keen on), but also many landlords regard the court application as something the tenant does in the first instance. So, since the tenant is not obliged to communicate its intention whether it intends to renew before the end date in the notice, by allowing the tenant to avoid court procedures, the landlord can lose out if the tenant should for any reason decide to not renew. At least, where a tenant, after applying to court, decides not to pursue the claim, the tenant must serve notice of discontinuance of proceedings, giving at least 3 months notice to end the tenancy, and that enables the landlord to recover costs and fees in connection with the application. When the date for application is deferred, and thereafter the tenant decides to not renew, all the tenant needs do is simply not apply by the extended date; no costs payable.

Interim rent can be affected if the application per s24a were, as if often done, included in the answer to the claim, so a separate application is necessary for the landlord to recover the market rent for the period from the end date in the notice to the giving up of possession. By agreeing to defer, the landlord also loses out on the possibility of being able to capitalise on opportunities that can arise during negotiations in tandem with court proceedings. The phrase ‘going to court’, often a negotiating ploy, is not confined to making of the application or the actual hearing itself, but includes procedures. Non-compliance with case management timetables can make it possible for a tenant to lose renewal rights, despite having made the claim and protected rights by the end date in the notice. (Whether such opportunities have value depends on the market and the landlord’s strategy. In a recent matter where I was acting for the landlord, the tenant, a bank, lost renewal rights through the striking out of proceedings. My Client waived the oversight and renewed inside LTA54.)

For the tenant, deferment can create problems: application or request for further extension(s) to the date might be missed/overlooked, also it might not be possible to take advantage of post-end-date events, particularly when it is agreed that as a condition of the agreement to defer the new tenancy will start on the end date in the notice. Although interim rent could be back-dated to the earliest date the tenancy could have been brought to an end, interim rent only covers the period between expiry of the old tenancy (or date of application per s24a whichever the later) and commencement of the new term.

The commencement dates for both the new rent and term are matters for negotiation. Whereas both often start from expiry of the old tenancy, or the end date in the notice if different, frequently that is valuation convenience and/or reflects inexperience. In practice, there is nothing to prevent either rent and/or term commencement dates starting on completion of the lease. If the matter does go to court then the hearing date becomes the valuation date, and the term and rent commencement dates subject to s64 – at least 3 months after the hearing date.

This is an example of what can happen when the effect on rent and other terms of the tenancy of post-end date events have to be ignored. I was instructed to provide an expert opinion valuation for the measurement of damages arising out of a negligence claim where the tenant’s solicitors had overlooked the further extension date and had not sought further extension or applied to the court to protect the tenant’s renewal rights. It was suggested the date of breach was the last date for application to the court; also loss measured in terms of any increased rental for the duration of the term of the new tenancy, and as a consequence of any rent reviews, any diminution in the value of the lease as a saleable commodity.

In my report, I referred to the leading authority rule in solicitor negligence cases per County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1986] but, as I understood, the general rule that damages are to be assessed at date of breach is variable if assessment at another date might more accurately reflect the overriding compensatory rule. Per Kennedy v KB Van Emden & Co [1997] “The overriding rule governing the awards of damages is that the party who has been injured should be awarded by the court a sum of money which, in so far as money can do this, will, when it is paid, fairly compensate him for the wrong which the defendant has inflicted upon him. That will often involve looking at what happened or might have happened shortly after the defendant’s breach of duty, what has happened between breach and trial and what is likely to happen in the future. ” Unlike at a rent review where post-review events are irrelevant, because they would not have been known about at the date of review (or valuation date if different per the lease), valuation at lease renewal is not necessarily on a set date, since neither rent nor term has to start on expiry of the existing tenancy, or end date in the notice, if later; as I have said, both rent and term commencement dates are negotiable. The court hearing date is the only time a valuation date is fixed.

During my research, I discovered that shortly after the suggested date of breach it had become public knowledge that Sainsbury’s would, a few months later, be opening a new store almost opposite the premises. I considered that new store would have a measurably adverse effect on the tenant’s business. I opined that had renewal rights been protected by application to court with negotiations alongside ensuing procedures, rather than based on the end date in the s25 notice, then post-application negotiations paralleling case management procedure would most probably have allowed for the effect of “Sainsbury’s” and would have resulted in variations in the terms and conditions of the tenancy, and which I considered would have been obtainable either by negotiation or in court by the time of a likely hearing date. As it happened, other than vacating the premises, the tenant had no choice, but agree the landlord’s form of tenancy which, since it was in most respects identical to the old tenancy, contained some terms that had become onerous as a consequence of “Sainsbury’s”.

Even with no conditions attached to the agreement to defer, the tenant is still at risk post-end-date adverse events would be ignored or resisted in negotiations with the landlord, because of an assumption or agreement either or both the renewal term and rent commencement dates would start on expiry of the existing tenancy; also, a request for deferment could be construed as the tenant’s unwillingness to incur costs. Agreement to defer is not something necessarily obtainable by return; the landlord might not be available, or be sufficiently familiar with the procedure without wanting advice on implications.

Although it might be thought the landlord would also want to avoid costs, particularly when there has been a dialogue between landlord and tenant during the run-up to the application date and the landlord has given the impression of not wanting to go to court, critical time-limits are not a matter for bluff or complacency. The solicitor will need a few days to ensure application is made in good time; and where tenants are conducting their own negotiations, just because the s25 notice contains proposals for the new tenancy and just because negotiations with the landlord are well-advanced does not mean the tenant’s need to protect renewal rights should be regarded a formality that could be reliably dispensed with.

On expiry, there is no automatic security of tenure: it has to be applied for. The procedure for ending and renewal of a tenancy per LTA54 must be treated as completely separate to any negotiations for the renewal terms. As soon as either s25 or s26 notice is served or given, LTA54 procedures apply, regardless of the cost-consequences. In other words, if you can’t afford or don’t want to incur the expense of litigation, then don’t issue s25 or s26 notice. Costs on expiry and renewal can and do mount up, for both parties. When proceedings are stayed, the pressure is eased, but since either party can restore or the court resume, compliance with the procedure is a costly exercise.

Wherever possible, I try to avoid incurring extra costs for my client, but sometimes it is necessary to test the depth of the other party’s resistance to a particular point(s) by involving costs of fighting. In principle, a tenant is entitled to renew on the same terms and conditions as are in the existing tenancy, subject to mutually acceptable updating to modern practice. What a landlord is not entitled to do is impose upon the tenant a change that would result in a more onerous burden of risk that could not be adequately compensated by a consequential decrease in rent; O’May v City of London Real Property Co Ltd [1983]

Nothing ventured, nothing gained! For landlords, wider consequences in not being able to change a term or condition include 1) a possible reduction in the capital value and/or marketability of the investment, and 2) the continuation of some wording whose shelf-life was not expected to last indefinitely. For tenants, wider consequences are either unacceptable because the proposed change is obviously more onerous, or considered of no consequence in the scheme of things. It is easy to miss the point by not appreciating long-term implications. A tenancy will often last for years and every word has consequences. For example, in a matter I dealt with recently, the landlord had covenanted to carry out some repairs to the premises and having done so before the tenancy had been assigned to my tenant-client, wanted the covenant excluded in the renewal. I had no objection provided the landlord would pay for a structural survey to confirm the work had been carried out to a standard commensurate with the full repairing covenant insisted upon. The landlord’s surveyor considered the agreed rent was too low and that in itself should allow for other factors. A purist approach ought not suffer overriding cost implications, but I accept the practicality: even so any compromise for expediency is likely to have adverse repercussions somewhere along the line.

The fashion for short-term tenancies amongst tenants may be preferable to a longer term with rent reviews, so as to offer some greater flexibility in the market – and demonstrate the lack of confidence the tenant has in its business – but the risk is that the permutations and the extra cost of renewal can benefit the landlord and play havoc with the tenant’s business plan.

Dec 2013 – The purpose of rent review is threefold:

1)      to enable the landlord to review the rent payable; 

2)      for the tenant to ensure the rent payable is no more or less than it should be; 

3)      for both parties to monitor the performance of the location and trading position.  

Reviewing the rent payable is all very well for landlords but for tenants ensuring it is no more or less than it should be is not how most tenants would view a rent review. For many tenants, the only way the business can remain profitable is when costs are below the going rate. Even so, despite the tenant’s perspective, a rent review is for the benefit of both parties.

In United Scientific Holdings v Burnley Borough Council (1978)*, Lord Salmon said: “To my mind, it is totally unrealistic to regard such clauses (rent review) as conferring a privilege upon the landlord or as imposing a burden upon the tenant. Both the landlord and the tenant recognise the obvious, viz., that such clauses are fair and reasonable for each of them. I do not agree with what has been said in some of the authorities, namely, that a rent revision clause is for the benefit of the landlord alone and not at all for the benefit of the tenant. It is plainly for the benefit of them both. It is for the benefit of the tenant because without such a clause he would never get the long lease which he required; and under modern conditions it would be grossly unfair that he should. It is for the benefit of the landlord because it ensures that for the duration of the lease he will receive a fair rent instead of a rent far below the market value of the property which he demises.”

Tenants do have a point, however, in the context of rent payable. Generally, a rent review is not about the rent payable but about the rent at the review/valuation date. The rent payable is the amount payable after the rent is agreed or ascertained. Therefore, there are, in fact, two rents at rent review: 1) the review rent in accordance with the review clause and 2) the rent payable regardless.

The difference arises because of what is known as ‘upward-only’ rent review. ‘Upward-only’ does not mean the review rent necessarily has to go up. The review rent might be more or the same or less than the rent payable. ‘Upward-only’ refers to the rent payable after the review rent is agreed or ascertained as not usually less than the rent payable before the review. (I say ‘usually’ because there are circumstances where the rent payable could differ.)

It might be thought unlikely to be cost-effective for either landlord or tenant to review the rent if the rent payable would be more than the review rent. In some instances, however, it might be beneficial for the landlord or the tenant to review the rent regardless, such as, for example, for monitoring performance.

Location is the underlying driving force for both property performance and tenant-demand. Property performance is the measure of rental and capital growth; both factors are needed to counteract and outpace what would otherwise be a depreciating asset. No increase on review is often symptomatic of a location that is static or in decline.

Property is a depreciating asset whose rate of depreciation can be outpaced by rental and capital growth. Rental growth is a product of demand by tenants according to the supply and availability of premises that would satisfy and fulfil the tenant’s business operational requirements.

Tenant-demand is a driver for growth, but a premises-supply-shortage which leads to higher rents will challenge the economical rental for those businesses whose presence in the locality is part of the attraction; there is a cut-off point at which the more successful businesses will baulk at any further increase in rent. Although a rent review might be thought a private matter between actual landlord and actual tenant and of no concern to anyone else, any extra rent will increase the insurance premium cover for loss of rent and affect the Rateable Value (hence business rates payable). Also for the tenant the money has to come from somewhere and when an increase exceeds the tenant’s economical rent the tenant will have to make savings elsewhere. (In my opinion, the first sign of a location entering decline is when the tenancy of a shop previously let to a multiple retailer is assigned or the premises re-let to a non-multiple retailer.)

In theory, a rent review should be a straightforward matter of the landlord and tenant agreeing the rent for the review period. In practice, it is not as simple as that. In business tenancy law, the review rent is not about how much the actual tenant could afford or how much the actual landlord wants to get a return on the investment, but the rent others would agree. And the rent that others would agree is arrived at by evaluating the evidence in the light of the terms and conditions of the lease.

Rent does not exist in isolation. Rent is the product of the terms and conditions of the tenancy upon which the premises are let, or to let. Whenever a new lease is granted, the parties and their advisers will agree the terms and conditions for the letting. There is no standard form of lease for all business premises. Consequently, the terms and conditions of each individual lease will affect the review rent.

Usually, a review is to market rent, unless the parties have agreed another basis as specified in the lease. Where rental valuation has regard to evidence, the hierarchy for best evidence is a new letting in the open market but the premises are let already (even if unoccupied) so the market cannot be tested. The alternative, which is the basis of rent review, is to assess the rent objectively: in other words, assuming the premises are available to let on a specified date at the rent that would be agreed between a hypothetical willing landlord and a hypothetical willing tenant, on the terms and conditions in the existing lease.

Dec 2013 – The starting point for operation of a rent review is some form of notice.

The form and phrasing of the notice, the timing of the notice, the mode of service, the identity of the recipient, the address for service, and so on, are all critical factors.

Where a lease requires the tenant to serve a counter-notice for the rent review, the wording of that counter-notice must accord with the wording in the review clause.

‘Cutting corners’ and inventing phrasing instead of complying with the requirements in the lease often results in an invalid notice. The snag with straying from the requirements of the lease is that another version may miss the purpose of the counter-notice.

Generally the purpose of a counter-notice is to prevent the content of the notice being enforceable. Where the landlord’s notice specifies the rent, for example, it may not be enough to say that the rent specified is not acceptable.

Bellinger v South London Stationers Ltd [1979] – [1979] 2 EGLR 88 – is an example of what can go wrong: “we would hardly need to add that we do not accept your revised figure” was not considered sufficiently specific to be a counter-notice.

In Shirlcar Properties Ltd v Heinitz & Another [1983] – [1983] 2 EGLR 120 – use of the expression ‘subject to contract’ did not constitute effective notice to set a rent review procedure in motion when formal notice had to be given.

Use of the expression ‘without prejudice’ is widely misunderstood and so it comes as no real surprise to find that many surveyors are unable to grasp the effect of such wording when concluding rent review negotiations.

An offer made ‘without prejudice’ is binding when the offer is accepted. By adding the words ‘ subject to contract,’ however, the presumption that the parties intend to create legal relations may be expressly negatived.

From Rose & Frank v R Crompton Ltd (1923) – [1925] AC 445 – “the words of the preliminary agreement in other respects may be apt and sufficient to constitute an open contract, but if the parties in so agreeing make it plain that they do not intend to be bound except by some subsequent document, they remain unbound though no further negotiation be contemplated. Either side is free to abandon the agreement and to refuse to assent to any legal obligation …. “

When concluding negotiations, it is common for surveyors to head the correspondence ‘without prejudice’ (and/or) ‘subject to contract.’ In such cases, the concluded rental will be subject to the surveyor’s recommendation of acceptance. This reservation in itself is sufficient evidence that no formal agreement has been reached, even if the recommendation refers to the need for ‘Board approval’ reckoned to be a formality. Until an offer is made without reservation, it is not agreed and some surveyors and parties feel that withdrawal from the ‘conclusion’ is tantamount to unethical or unprofessional behaviour against the spirit of negotiation. Such opinion is, of course, the prerogative of the aggrieved party but it does not affect the legal position and, whereas such practice may conflict with expectations, surveyors must recognise that the law applies as much to the interpretation of rent review covenants as it does to negotiations.

Since notices can cause problems, there is a trend away from the use of notices in the procedure. Instead, the steps taken to rent review are to go straight to agreement within a reasonable period of time, such as 3 or 6 months, and if in default then for the dispute resolution procedure to be used.

(Edit 2025: in the absence of any notice, per case law it is implied that a notice should be served. When I serve such notices, I describe it as a courtesy notice.)

Dec 2013 – Notwithstanding Reed Personnel Services plc v American Express Ltd [1996] wherein the court said it is “not good for the tenant to say what is good for the landlord” many tenants are fond of negotiating as if they were the landlord. Although technically cutting no ice, it’s an approach that can succeed when for the landlord to be ‘accommodating’ would be sensible under the circumstances. In this context, accommodating means allowing some slack in compliance with the tenancy.

I see no point in incurring time and expense in having a lease and then not sticking to it, but I do realise it is the landlord’s prerogative whether to enforce it to the letter. The landlord and tenant relationship is on-going for the duration of the term and beyond. For routine matters there may be no disagreement, but, otherwise, beyond the law, and valuation, negotiation is about psychology.

Psychology is a science, an academic and applied discipline that involves the scientific study of human or animal mental functions and behaviours. At a down-to-earth level, and in the context of a business tenancy, what psychology does is to interfere with the strictures of the commercial contract by injecting a human element. In 1988, in my booklet, “The Psychology of Rent Review Negotiation” I said the relationship between landlord and tenant should ideally be a partnership, sharing the ups-and-downs together. In practice, the interests of landlord and tenant remain diametrically opposed: the landlord wants more, the tenant wants less. During downturns, the cushioning upward-only review brought about by landlord wanting and the tenant offering to maintain rental income throughout the term does the job intended by both parties. So why should a campaign to abolish upward-only reviews want to alter a mutually accepted perfectly good system? Frankly, I think the answer is self-interest. Instead of rising to the challenge of organic growth – improving upon what exists already in pursuit of excellence – such tenants grow by expansion: they become addicted to momentum and, over-indebted and overstretched, end up disconnected from reality and losing their way. Although in theory expansion makes sense, inorganic growth is never the way to develop a long-term consistently profitable business because too much gets taken for granted. Tenants urging politicians to do something about their business tenancy arrangements when having entered voluntarily into a commercial contract such tenants find that what they signed is not what they had in mind is not the sort of behaviour one would expect of companies surrounded by advisers. Not to be outdone, and despite a muted response from government, many companies and the surveyors that act for them, have got it into their heads that such tenants should be thought of as doing the landlord a favour in wanting to lease the premises.

Asserting the landlord should care whether a tenant can afford the rent is a crafty way for the tenant to get what it wants; it also makes it harder for that particular landlord to enforce the terms and conditions of the tenancy. By removing from business tenancy law and rental valuation the impersonality that is the hallmark of the market, rent review and tenancy expiry/renewal has taken on a new guise. No longer a relatively straightforward application of business tenancy law and rental valuation, now it strongly features subjectivity whereby tenants promote the “wider consequences” for their business in the event that landlord is not accommodating. For example, a recent public display was Thorntons, the chocolatier, telling landlords wanting to increase its rents that Thorntons would close the shops and trade on the Internet instead. I think it fascinating a public company has to stoop so low to get what it wants – that doesn’t speak well for its products. And hardly impressive of a plc to tell shareholders that it would maximise returns and pay dividends to trade on the Internet rather continue to drain profits by maintaining a ‘high street’ presence. Be that as it may, in effect, landlords are being asked to subsidise a retailer’s desire to have it both ways, even though others would pay more rent.

For landlords, a dilemma of recession is whether tenants should be helped to survive the error of (their) ways. I emphasise ‘their’ because something tenants are good at is making pronouncements about the market as a whole as if their experience should be considered the only barometer of consumer behaviour. Often, the facts are found amongst suppliers: for example, Hornby plc (toys) results in June 2010 said “it is now clear that our larger retail customers recognise that they failed to fulfil their sales potential in 2009. ”

Life has ups-and-downs, and a business plan is rarely straightforward, but we are not supposed to come unstuck in times of change. One factor to ponder is whether it should be reasonably assumed inherent, depending on the calibre of tenant, for the tenant to be expected to have what it takes to anticipate downturns in its market and prepare accordingly. That does not seem to be how the victim tenant thinks: for them, the business sector ought to be considered a special case: a sort of level playing field for all, regardless of the ups-and-downs of the economy. Landlords too have self-interest. The most important factor is whether a landlord can afford to be accommodating. How much rent and what terms can be varied very much depends upon when the property was bought, how much was paid, and how much was borrowed.

It also depends on whether the tenant has a guarantor, because any material alteration to the terms of a contract which might potentially prejudice the guarantor will release him unless he specially consents to the variation, West Horndon Industrial Park v Phoenix Timber [1995] Although business tenancy law and rental valuation are not concerned with the wider consequences for the parties, psychology steps in to ask about the consequence for the landlord in the event of existing tenant default, such as whether the property would let in a fairly short time to a tenant of at least the same calibre, and at least the same rent; and whether on expiry the tenant in difficulties would renew for at least the same term as before. For a tenant, one reason for taking the route of insolvency, administration or CVA, is a consequence of alienation criteria that a landlord can include in a tenancy to reflect privity of contract: a tenant must consider the likelihood of finding a financially sound assignee. The number of tenants with the where-with-all to cope with slow trading is in short supply. An authorised guarantee agreement to sign, the tenant cannot afford the risk of a defaulting assignee.

The landlord should be mindful of changes to capital value that can be caused by tenant assignment and under-letting. The number of tenants whose covenant enhances value has been diminishing for years. Although a landlord may serve notice on a tenant for the purpose of protecting investment value, the timing of the notice is critical and the procedure little used. Generally, commercial property for investment is a depreciating asset, because the price paid rarely reflects the market value of the property alone, but includes the calibre of the tenant. Often, growth is illusory: although capital value is estimated by valuing on a date, investment performance should allow for inflation, loss of interest on equity, and holding and management costs, interest, tax on rent and any gain. Strip out those figures and whatever’s left is the real growth. Nowadays, maintaining investment value is just as challenging as increasing value. For example, an investment for 15 years with 5 yearly rent reviews will only maintain its capital value if at each review the rent goes up by enough to offset fluctuations in investment yields and what might happen on expiry. Where a landlord has been accommodating, at subsequent rent review and on tenancy renewal, the likelihood of a rent increase diminishes, because in personalising the landlord and tenant relationship, by focussing on the business for which the tenant chooses to use the premises, the landlord can get stuck with a dud tenant and the investment under-perform for the wrong reasons. Many tenants would have landlords believe that the property system should be changed to reflect the changes in the market, but equally many landlords think tenants should change their modus operandi to synchronise with the market. The property system is more flexible than many tenants would like to think, if only because landlords can be accommodating. The underlying difficulty for those tenants, and surveyors that have prospered on the success of those tenants – and whose loyalty is to those tenants – is that really the problem their clients face is not caused by any intransigence amongst landlords, but that the mass-market has entered decline and fall. It is the Age of Individuality. Alongside the dominance of supermarkets for convenience and free-parking, and a few clothing companies for garments, it is the specialist retailers that are thriving, along with the giants of the internet.

At rent review, a tenant has no control of the psychology because the tenancy remains vested in that tenant so the review guidelines, which are emotionally detached, are paramount but, on expiry, the tenant does not have to renew. A choice whether to renew only puts the tenant in a stronger position if the tenant could afford to relocate or close the business at the particular premises. Multiple retailers and big companies are in a stronger position to dictate terms on renewal because rarely is the performance of their business overall dependent on any one branch. For smaller businesses, flexibility is limited. Often the value or saleability of the business as a going concern is inextricably bound up with the premises and a secure term of tenancy. Ever since investment value strayed from property fundamentals to become dependent upon covenant of tenant, that dependency has been exploited. The banks have done a stirling job using sale-and-leasebacks to maximise capital proceeds, only to serve up branch closures for the next course. What price the building without its original occupier? An investor is buying the building, not the tenant and no structured rent review, such as index-linking, pre-fixed increases and compounding is going to make up for the fact the more the rent payable exceeds the market rent, the riskier the investment.

In the shop property market, whilst the primary market that multiple retailers inhabit may not be providing much growth, the same cannot be said of the secondary market where there is often keen demand. The secondary market is not just about trading position, but also locality. Many secondary towns are more stable than primaries nearby, often because the Zone A rate is economical. In Ledbury, for example, the market town where I am based, and whose population is just under 10,000, demand for shops is buoyant and rents have gone up in the last couple of years.

Another factor that those that think the world owes them a living would do well to remember is that commercial property often lends itself to redevelopment and reconfiguration, or simply disposal with vacant possession. One thing tenants should be careful of when testing the loyalty to the tenant’s cause is that the landlord might be thinking of using the opportunity to do something different with the building. In the balance of power, one principle remains steadfast: the property belongs to the landlord, so how the tenant extracts itself from the tenancy commitment must be honourable otherwise the course of action will back-fire on the tenant.

Dec 2013 – Amongst the many aspects of my work I love is lease analysis. Possibly it’s the same reason many people enter the legal profession, but for me the prospect of being able to pour over every word and phrase and get bogged down in detail is stimulating. Perhaps because investment is mostly about finance and business about numbers, there is a tendency amongst landlords and tenants to focus on the figures, but as I say on my website, “to arrive at the right figure, the words must add up”

For the most part, rent review, break-clause, and lease expiry involves some form of notice. A notice is an integral part of the procedure, not a stage that can be skipped. Many people don’t seem able to word a notice correctly, even though prescribed forms and, sometimes, as at rent review, the lease will make it clear what must be said.

I prefer to serve the notice to ensure wording is correct, but where I am asked to take over negotiations started, increasingly I am finding that no thought has been given to the validity of the notice.

Checking the correct name of the parties comes under the category of ‘from, to and upon whom’ the notice is sent, addressed and served. It may be necessary to require proof of title, when the landlord on the notice differs from the tenant’s knowledge. The same applies in reverse, sometimes more so.

Years ago, when the previous Labour Government dangled a carrot of 10% corporation tax in front of un-incorporated businesses in exchange for incorporation, many tenants took the opportunity to incorporate, but did not apply or did not realise they needed to also apply to their landlord for assignment of the tenancy.

Especially when rent is paid by standing order, a landlord should be careful to check the payee is the same as the tenant, otherwise it could be reasoned successfully the landlord has deemed to waive requirement to assign. Where landlord’s inexperience or ignorance of the facts is exploited by an individual tenant that has become incorporated the position is harder to regularise where that individual refuses to be guarantor. And, in a matter I am dealing with, the position is even more complicated where the tenant has died, a successor takes over the business, pays the rent and the first the landlord hears about it is when a rent review memorandum in required in the name of the successor’s company. For some landlords, it makes no difference who the tenant is as long the rent is paid, but letting a tenant off the hook of a direct covenant can cause problems.

Notices concerning a break-clause must be worded and served correctly. The place of service may sometimes be at a different address to the lease: Claire’s Accessories UK Ltd v Kensington High Street Associates PLC [2001]. The name of the tenant must be correct: Procter & Gamble Technical Centres Ltd v Brixton plc [2002] Acknowledgement may be important: Orchard (Developments) Holdings Plc v Reuters Ltd [2009] Compliance with the prescribed manner in the lease is vital: per The Hotgroup Ltd v The Royal Bank of Scotland PLC [2010], “no notice will be deemed to be validly served unless…” was enough to invalidate. Unlike at rent review and break-clause where an invalid notice could mean the landlord losing the right to review or break, or the tenant losing the right to object to the proposal or break, the consequences of an invalid notice at lease expiry may not be so dire.

Unless critical to end the tenancy on the contractual expiry, it is a question of whether landlord or tenant should get in first, since only one notice can be served. The only requirement is not less than 6 months or more than 12 months notice must be given to end the tenancy. On expiry of a tenancy, it is not necessary for the end-date in the notice to be the same as expiry of the term, provided the notice end-date is no sooner. However, with a s26 notice, the tenant can request the new tenancy to start up to 12 months from that date of notice. So, it is not only the date of the notice that matters but also the end date, and those dates can only be determined by the tenant’s intentions, and informed opinion regarding the market. One mistake is for the end date to be earlier than expiry of the contractual term. Whether the mistake should be pointed out sooner or later, or taken advantage of with a s26 notice, depends on tenant’s intention and market rent. With a s25 or s26 notice, the proposals for the new tenancy, assuming no opposition to renewal, must be set out in full, with details of any material changes to the tenancy. A common mistake is that the proposals for the new tenancy do not spell out in detail the extent of the demise, even though the wording in the Act is clear and mandatory: under Section 25(8) of the 1954 Act (as updated by the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003) a landlord’s friendly notice “shall not have effect unless it sets out the landlord’s proposals as to: (a) the property to be comprised in the new tenancy (being either the whole or part of the property comprised in the current tenancy)…”.

It is, in the absence of case law to date, a moot point whether the extent of a demise has to be spelt out in detail if the property in the new tenancy is the same as the existing tenancy. But where the property to be comprised in the new tenancy is not set out in detail, there is ground for successfully challenging validity of the notice. When validity is challenged, I am often referred to Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997], the House of Lords stating that “if a notice unambiguously conveys a decision to determine, the court may nowadays ignore immaterial errors which would not have misled a reasonable recipient.” However, that may be so in the case of a time-limit or wording in a unilateral tenancy contract, but per Burman v Mount Cook Land Ltd [2001] it was held that a landlord’s statutory notice was invalid because it did not comply with the statutory requirements.

Where the extent of the premises is not detailed and where the application date has been extended by deferment, and even though that merely changes the end date in the notice, not the procedures, it could be reasoned the tenant has lost the right to challenge validity of the notice through part performance. The only case, of which I am aware, is Keepers & Governors of the Possessions Revenues & Goods of the Free Grammar School of John Lyon v Mayhew [1997], where the tenant’s counter-notice assumed validity and by carrying out LTA54 procedure, the tenant represented that s25 notice was a good notice. That decision predated the 2003 Order so, arguably, there is nothing to prevent a tenant from successfully challenging validity at any time before it is necessary to apply to the court; although leaving it to the last minute would be risky, since it is unclear whether there is efficacy in a ‘without prejudice’ claim — which would be necessary to protect the tenant’s interest in the event challenge were unsuccessful. The proposals for the new tenancy must be set out in detail but the rent can only be a rough guide because it is not possible to value for the future. So, whilst I do not think a tenant or landlord could be admonished for proposing a rent at a level were the tenancy to start from the date of the notice, I think a tenant or landlord would be open to undermined-credibility for proposals that would be unrealistic now. I think that because the court is likely to take an active role in preliminary proceedings, the actual figures of which the court would be aware at the case management conference and so on should be as close to the market rent, as defined by s34 and s35 LTA54.

Dec 2013 – Where a tenant is a company and the landlord requires a director as guarantor or a rent deposit, that person is exposed to both the risk of rent and all other terms and conditions of the tenancy, should the company default. But an advantage to the tenant in opting for a guarantor is that the landlord has no control of the guarantor’s financial affairs which means the guarantor might not in the event be found to have any assets.

An alternative to a guarantor (or as well as if the landlord is insistent and/or the tenant willing) is a rent deposit, normally between three and twelve months rent. The deposit can only be used for the express purposes per the deed, but the advantage to a landlord is being able to withdraw from the amount rent and other monies payable in default. Interest normally accrues to the principal and may be repayable to the tenant at intervals.

For the landlord, the snag with a deposit is that often it’s only a once or twice useable protection and which can be eroded by forgetting to require a top-up of the deposit on a rent review increase. The downside for the tenant, as well as parting with capital and the possibility of never seeing it again, despite the terms of the deposit deed, is that in the market a prospective assignee for the tenancy might not be able to afford or be willing to hand over the same amount.

Dec 2013 – For purpose of agreeing or determining a rent, there are five key dates:

1) the review date;
2) the valuation date;
3) the earliest date for implementing the dispute resolution procedure
4) the date when the revised rent is payable; and
5) the date when any back rent is payable.

The review date is either specifically stated or calculated for the period from commencement of the term. A lease that does not define or specify the term commencement date creates problems, since it becomes a question of whether from the phrasing in the lease it is intended for the term to start from the commencement or the date of the lease. The date of the lease is the date of the document and even if that date were the same as the term commencement it is preferable for the lease to be clear.

I prefer the actual date(s) for the review(s) to be specified. That avoids convoluted terminology and interpretation of anniversary dates. (Edit: 2025. Anniversary dates are better where the lease is inside LTA54 and the lease definition of “Term” includes the statutory continuation. So during the continuation there will be a rent review (or more depending on the review interval and how long the tenant holds over.)

It is important to agree the valuation date, since that date does not have to be the same date as when the revised rent is payable.

Normally the revised rent payable would be back-dated to the review date, unless otherwise stated in the lease.

Dec 2013 – The Government has announced that the five-yearly revaluation of all commercial properties in England will be postponed from 2015 to 2017.  Every 5 years, commencing April 1990, Rateable Values are revalued, based on rental values at the antecedent valuation date, 2 years previously. For example, 2010 Rateable Values (which came into force 1 April 2010), are based on rents at 1 April 1998.

August 1998 is generally considered (by rent review surveyors) as the turning point for rental downturn so since post-valuation events are disregarded, because they could not have been known about at the time, rents in and around April 1998 do not take into account subsequent changes in the market.

If the 2015 revaluation had gone ahead then there would have been an adjustment in rateable values based on the market as at April 2013.  In many parts of the country and for some types of premises the postponement of the revaluation will lead to the continuation of artificially high rateable values until April 2017. For the moment the postponement applies only to England.

It is reported that some of Britain’s leading retailers have called on the government to freeze business rates next year (2013/2014). I have commented in Retail Week, as follows:

“I think one has to be very careful with the subject of business rates. On one hand, it is understandable for profit-motivated retailers to not want to pay any more (than they have to). On the other, any freeze or indeed any reduction in rates payable will reduce the revenue to central Government for redistribution to county councils, and in turn the provision of council services for the public-at-large.

As a tax on non-domestic property, business rates are economical to collect. The rate in the £ (UBR) is centrally fixed, the billing (local) authorities demand and enforce payment, the money handed over to central government for re-distribution to the local authorities. Whether UBR is a fairer system than before 1990 when local authorities set their own rate in the £ may not be so valid now that local authorities are having to cut-back on services to abide by central government dictum, and have to find other sources of revenue for their authority, such as increasing car parking charges in town centres. The irony there of course is that what might’ve been envisaged a virtuous circle has turned into a vicious circle: the more local authorities play power-games in shopping centres by increasing car parking charges, etc the less the motorist-shopper is inclined to visit the ‘high street’ to shop.

From my limited knowledge of rating, a service I stopped providing some time ago, I think that valuation approach to Rateable Value may be flawed. Strictly, as I understand, the rating valuation should be based on vacant possession, the notional rent that the premises would let at. However, the VOA is ‘lazy’: instead of assessing each property afresh on its own merits, the rent under an existing lease is used as the starting point. To be fair, there is a tendency to mark down through averaging, and for the tone in many places to be below par, but that I’m told is not necessarily a valuation approach, so much as an ideological or political hint, whereby shops in primary positions in city centres are valued with exactitude, in order to ‘subsidise’ those in less trading positions.

There are also innumerable under-valuations: many occupiers are not paying their fair share of business rates. Many reasons including the VOA using the wrong valuation category – warehouse, not trade counter, for example – or the hereditament has been altered and the VOA not informed – understandable for an owner or occupier to not want to alert the VOA to anything that might result in an increase in rates payable, but why doesn’t the VOA simply comb through all the planning applications (information in the public domain) and visit the premises to check (staff shortage, I guess would be the excuse!).

Another unfairness is Transitional Relief, where through a quirk of political ideology and history of the occupancy the ratepayer in one property may pay less than the neighbouring occupier: that’s not a level playing field for competition. Remove the inefficiencies, scrap TR, and perhaps the proper total revenue from business rates would increase the amount in the Government’s coffers and by default enable a freeze.”

Jun 2013 – When a building comprises ground floor commercial premises let on a business tenancy, and upper part residential flat sold on a long lease, there are two ways for the landlord to recover the costs and expenses incurred by the landlord in connection with repair and decoration of the common parts of the building, such as main structure walls, foundations, roof, etc.

One way is a ‘pay-as-you-go’ clause in both leases whereby the respective tenants separately covenant to reimburse the landlord whenever expense is incurred. The other is a service charge, payable part in advance, the balance after the end of each yearly accounting period.

Even though when repairing, etc., covenants are only partly the tenant’s responsibility, there may not be a reciprocal covenant on the landlord to carry out the work. The CML likes defined responsibility, basically for the landlord to also covenant, but to be obliged might not suit the landlord. Even if it were implied that if the tenant were not responsible at all, so surely the landlord would be, there is a practical difference between enforcing an implication and actual.

An advantage of ‘pay-as-you go’ is that the landlord may not be obliged to the tenant; the disadvantage is having to pay for the work before recovering from the tenant. With a ‘proper’ service charge, where an interim payment is in advance, the balance at the end of the charge accounting year, the landlord would have money up front and/or in the kitty.

For what might seem routine matters, landlords frequently encounter resistance from tenants when applying the wording in a lease literally. Services charges, along with building insurance, are amongst the thornier issues between landlord and tenant, and with mixed-user properties services charges can be fraught with difficulty.

The commercial property market is largely unregulated and a lease is a commercial contract which means the parties are deemed to know what they are doing. Residential property is largely regulated and oriented towards consumer-protection legislation. The main reason, I suspect, is that residential tenants pay using net income after tax, whereas for businesses leasing commitments are tax-deductible.

With commercial property, interpretation of the lease is a separate issue, but otherwise it doesn’t matter how open-ended a cost commitment, the courts are unlikely to interfere. Not so with residential property where regardless of any contractual agreement, the Landlord and Tenant Act 1985 (as amended) requires the landlord to comply with a formal consultation procedure in connection with qualifying works, failing which the maximum amount recoverable from the lessee is £250.

The Landlord and Tenant Act 1985 is to ensure residential tenants are not required to pay for unnecessary or defective services, and/or for the payment for necessary services to be provided to an acceptable standard. The gist of Daejan Investments Ltd v Benson and others [2013] is that failure to comply with the minutiae of the consultation procedure ought not be an opportunity for lessees to wriggle out of payment. However, per Phillips v Francis [2012] a landlord has to consider overall expenditure on qualifying works, the whole of which determines whether the leaseholders have to be consulted, even though the charge would be £250 or less for each individual leaseholder.

Long leaseholders may like to regard themselves owners, they are not: all they have is use of the space inside the premises, together with the right for the purpose stated in the lease for the duration of the term (subject to any rights on expiry). Everything else belongs to the landlord (subject to any exceptions) so arguably it is socially fair and reasonable when the landlord wants to carry out works at the tenant’s expense for the tenant to have a say in how much should be expended.

Generally, the landlord wants to do the works; tenants may be less inclined to make the first move when they know it is going to cost them. With mixed-user buildings, where the business tenancy may include tenant-enforceable covenants and/or tenants undeterred by legal proceedings, it is a question of who wants the works done and the urgency.

In a matter I dealt with for a landlord of a mixed-user building, the residential lessee wanted repairs done urgently because the state of the building was deterring his prospective (sub)-tenants. He informed my client it was the landlord’s responsibility but would get the work done provided the landlord would reimburse approximately £5000. I advised that, despite the lessee having indicated footing the bill, the work couldn’t go ahead until the consultation had been complied with, otherwise the lessee could refuse to pay more than £250. I wrote to the lessee to explain. I was told I could forget any suggestion of him paying my fees, let alone another surveyor for supervising the works. In response, I provided a copy of the lease whereupon I was questioned whether the fees were reasonable! As the matter progressed and insistency of urgency intensified. It transpired the estimates the lessee had obtained were verbal, so I set about obtaining written estimates from the several contractors, The lessee said the lowest price should be accepted, but the works proposed by the contractor would have resulted in an improvement not a repair, so not recoverable. Mentioning that, while scaffolding was erected, my Client could get some other work done, in the event the lessee told us to forget it, he would get the work done at his own expense.

Where the landlord wants to undertake works, then the consultation procedure must be satisfied with the residential element before the work is started. Where the commercial tenant wants the landlord to do the works as a matter of urgency, the landlord might have to decide whether preferable to endure the inevitable delay in getting the go-ahead from the residential tenant or go ahead regardless to pacify the commercial tenant and avoid any proceedings. 

Feb 2013 – It is an established rule of English law that a person can only enforce a contract if he (or she) is a party to it, or a lawful assignee of the benefit of the contract.

For a business tenancy, the “privity of contract” doctrine means the first (original) tenant can assign his interest in the tenancy (presupposing the lease permits assignment), but not his relationship with the landlord.

Pre-1995 – The Landlord and Tenant (Covenants) Act

Before 1995, though many commercial tenants did not realise this, by signing a lease a tenant agreed to be responsible for payment of the rent and performance of all the other covenants (e.g. to keep the premises in good repair) for the whole length of the lease, even if the lease was assigned and a new tenant had taken it over. And this, no matter how many times the lease was assigned to new tenants…

The first tenant remained liable for the rent, etc throughout the term of the tenancy, regardless of assignment. An assignee default at any time meant the original tenant could suddenly be presented with a demand for rent.

Privity of contract did not include any right for the original tenant to take over the remainder of the tenancy. How far along the line the landlord could pursue an original tenant was demonstrated when a friend, a beneficiary of a will, where the deceased had been the original tenant, became liable.

Post 1995 – Authorised Guarantee Agreement

After 1 January 1996, when the 1995 Act came into operation, the change in the law introduced what is known as an Authorised Guarantee Agreement, or ‘AGA’ for short. As the law now stands, and assuming completion of an AGA, only the first tenant, on assignment, remains liable for the duration of the first assignee’s interest in the tenancy. When that first assignee assigns, the first tenant bows out and the first assignee becomes liable for performance of the second assignee’s interest, and so on. 

The Act also gives the right for the outgoing tenant to take over the remainder of the tenancy should its incumbent assignee default. It also introduced a formality into what had previously been largely dependent upon case law, whereby a landlord can specify in the lease criteria that a proposed assignee has to satisfy to avoid any claim the landlord is being unreasonable in refusing consent to the assignment.

Without unnecessary delay

Any joy that landlords may have jumped to, quickly dissipated when it was realised that draconian criteria imposed on assignment could have a deprecating effect on a rent review. Consequently, the criteria have been softened and case-law has been added to the tort measures of the Landlord and Tenant Act 1988 by providing an indicative time limit on how long a period may be allowed before it can be claimed that the landlord is unreasonably withholding or delaying consent to an assignment.

Unlike a new letting in the open market, where the landlord may refuse offers without having to give reasons, a tenant wishing to assign is often presenting the landlord with a substitute tenant whose financial standing and investment covenant status the landlord may have little or no choice but to accept. 

Affordability

Even so, landlords are not obliged to ‘rubber stamp’ a tenant’s application to assign. There is no reason why detailed enquiries – due diligence checks – may not be made, and actually it is prudent of landlords to do so. 

That is not only for the landlord’s benefit, but also for the benefit of the outgoing tenant. The added protection of the landlord’s carefulness might prevent the outgoing tenant’s guarantee being called upon at some future date.

To the landlord, what really matters is not whether the assignee can afford the rent out of its own business, whether or not the existing business at the premises is also being disposed of, but whether the tenant could afford to pay even if its business fails. 

Although few tenants are of independent means, business tenancy law assumes all tenants to be so; generally, rent and compliance with other terms and conditions of the tenancy has nothing to do with how the tenant chooses to use the premises. Amongst larger companies, there is a preference for either underletting or surrender if possible. Assignment is to be avoided because of the risk of privity bounce-back through assignee default. 

Underletting as an alternative to assignment

Underletting enables the tenant to keep tabs on the situation, but this has its own problems: from procuring a reliable tenant to one that does not mind if the tenant or lease requires the underlease to be contracted out of the Landlord and Tenant Act 1954.

The value of an AGA to the landlord depends upon whether the outgoing tenant can be traced and the tenant’s solvency. Where the outgoing tenant is a weak covenant or savvy, it’s debatable whether it is better for the landlord to ask for a deposit in exchange for scrapping the AGA – all depends upon how canny the outgoing tenant may be?

Tenants often unaware of the risk they are taking

Where a premium for the lease is being paid, or the business is being sold as a going concern with the lease, in my experience, few tenants seem overly concerned as to the long-term risk of assignee default.

With a tenancy term of 10 years for example, even with a tenant break clause at the 5th year, this is a long period of time in which anything could go wrong with a business. On the face of it, outgoing tenants who are individuals or partnerships may not be able to do much about minimising the liability. But outgoing tenants that are limited companies, with no guarantor, would be in a stronger position to dump the liability. 

Not to vary the terms

As for proactive management to capitalise on any opportunity to enhance the value of the reversion, landlords should not unwittingly limit the potential in the AGA cushion by varying the terms of the tenancy for an assignee. This is because that could limit the outgoing tenant’s guarantor of the assignee’s performance to the date of the variation. 

To be on the safe side, it may be better to vary terms of the tenancy before the AGA is entered into, provided any variation would not fall foul of any unreasonable criteria in the lease, or invoke the wrath of the Landlord and Tenant 1988. Treading carefully at every stage is the name of the game. There are no easy answers, it all depends on the circumstances.

Jan 2013 – With a business tenancy, agreeing the documentation is rarely straightforward at the best of times so, unless the lease contains a tenant–break, a landlord won’t normally expect the tenant to want to quit before expiry of the contractual term.

When a tenant asks to be let off the hook, whether to agree or refuse is not necessarily an easy decision. The preference, normally in the lease, is to want the tenant to assign its interest or underlet the premises.

For the tenant, both alternatives may be fraught. The tenant must procure an assignee whose status either satisfies criteria or, if the lease does not specify criteria, to ensure no grounds upon which the landlord could reasonably refuse consent. An acceptable substitute could prove hard to find where the supply of ʼdecentʼ tenants has dried up. On assignment, and depending on the date of lease, the outgoing tenant might be required to sign an authorised guarantee agreement, whereby per privity of contract the outgoing tenant remains liable for the rent, etc., should its assignee default and only bow out after that assignee assigns. For leases before 1996, the first tenant remains liable throughout the term regardless. Privity can prove onerous. The outgoing tenant has no control over its assignee’s conduct, the landlordʼs enforcement notice comes out of the blue. With under–letting, the tenant-landlord stays in control, but responsible to the superior landlord for rent, etc, regardless of whether the under-tenant pays. Leases often require an under-lease to be contracted out of Landlord and Tenant Act 1954 so for the tenant it’s a matter of finding someone that doesn’t mind not having any legal right to remain in occupation after expiry of the under-lease.

Where there is quality demand for premises, or the tenantʼs business is sold as a going–concern, the tenant is only likely to request outright quit when not wanting to risk residual liability. Where there is little or no demand, the landlord’s risk includes a lengthy void, expensive insurance, hefty utility bills from deemed supply contracts, structural deterioration, vandalism, and, unless the building is listed or below the rateable value limit, empty property rates. A property unoccupied for a long time may in itself be a deterrent.

Whether the tenant is an individual or a company and has a surety/guarantor is relevant. Net asset value should be ascertained. Regardless of any effect on tenants of proceedings for non–payment, it is generally fruitless for landlords to pursue a man-of-straw. With a company–tenant, care should be taken to prevent the company becoming dormant, affecting investment value and creating problems for asset management. The use of dormant companies, formerly a tax loophole but nowadays, a ring–fencing device for the trading, or parent company, is widespread. Investors are notoriously lax in checking the prevailing status of existing tenants. With small company tenants, whose landlord is passive, or where the rent is paid on behalf of the tenant, the legal tenant may have been dissolved, or the occupation transferred without consent.

When individual–tenant(s) incorporate, applying to assign the tenancy to the company is frequently overlooked. Often only when a notice is to be served, assuming due diligence, or the tenant requests something is an irregularity discovered; it may then become a matter of whether or not the landlord is deemed to have acquiesced.

For a decision to accept surrender or vary terms of the tenancy involving an assignee, care should be taken to avoid prejudicing privity of contract with the previous or first tenant and surety. Surrender ends the tenancy. Varying terms could limit the first or previous tenantʼs and surety liability to that date.

Generally, tenants are honourable, and asking to be let off the hook is symptomatic of wanting to do the decent thing. When, for whatever reason, landlords refuse, tenants resort to roundabout means: non-payment of rent(s), removing stock and fixtures to defeat bailiffs in the hope of forcing the landlord to re-enter, abandoning premises, and handing back the keys. With company tenants administration is a solution. Landlords may consider pre–packs, the pre-arranged sale of (parts of) the business to persons of the failed company, unethical but the practice is within the law. The administrator must maximise the value of the companyʼs assets as soon as possible
to pay creditors.

A simple way to accommodate the tenant’s request is to agree surrender in conjunction with simultaneous reletting to a new tenant or disposal. The landlord (agents) handles the marketing, the cost of which could be shared or borne by the outgoing tenant. Another way where the landlord is confident of early reletting is for the tenant to pay a capital sum equivalent to 2–3 times passing rent, to remove all fittings and fixtures and vacate the premises in a clean and tidy condition. With shops the tenant out sooner than later may be better because a snag in allowing a tenant in occupation whilst premises are marketed is that prospective tenants can ask about the trading position and be deterred by comments.

When a tenant is in trouble, often the writing is on the wall and the message may also be a dire warning for the location yet many landlords isolate the situation and fail to avoid the downfall by disposing of the investment before wider consequences become obvious. For premises in demand reletting is less hassle, but elsewhere it makes no sense, at least not to me, to hold a property for the sake of it. Investors may dislike paying tax, but a substantial difference in value can exist between a property with vacant possession and let to a tenant whose investment covenant is sought after. To keep the property for income is only worthwhile if trouble-free.

When tenants want out, change is in the offing. For landlords, the decision is whether to go with the flow, or resist and have change forced upon them.

Sep 2012 – All this carnage on the High Street must be causing problems for internet companies – where are people going to go in the future to look at stuff before they buy it on-line?

Jun 2011 – Per Scullion v Bank of Scotland plc (t/a Colleys) [2011] the Court of Appeal has overturned the High Court decision that for buy-to-let residential property the valuer was liable to the purchaser.

The CA held that although the valuer had been negligent and the purchaser had relied upon the valuer’s report (amongst other advice) when deciding to proceed, the purchaser did not establish foreseeability of damage or a sufficient degree of proximity between himself and the valuer. Nor did the purchaser show that it would be “fair, just and reasonable” to impose (on the valuer) a duty of care to the purchaser. The Court held there were important distinctions to be made between valuations for buy-to-let purposes and those made for home buyers.

The court commented that those buying properties to let, were less “deserving of protection by the common law against the risk of negligence than those buying to occupy as their residence.”

Sep 2009 – It seems to me there are a growing number of people thinking to themselves now seems like a good time to invest in shop property. But I’m not convinced. Not because life’s difficult for many retailers, and that for many struggling on in the hope of surviving is possibly about the best they can do, but that that the sort of property on the market for sale doesn’t fill me with much enthusiasm for its investment potential.

Unlike the stock market, where you’re buying a share of the company’s business, with property you are not. You are simply buying the building in or which the tenant runs its business. Whether the tenant intends to remain there is not something you are entitled to know and the tenant is not obliged to keep you informed. The only time the tenant has to tell you it is going is when it applies to assign the lease, sub-let the property, or does not renew the lease on expiry. And/or, in the case of a limited company or plc, when it puts the occupant tenant in liquidation, administration or a CVA. Therefore, when you buy a shop property investment, you are placing a good deal of trust on the fact the tenant will continue to be the tenant for at least as long as the price you pay is commensurate with the value you have placed on the property per that price you have paid. For example, if the price you pay equates to 7% yield then to maintain that value, all other factors remaining constant,  the tenant or a tenant of at least the calibre (if the lease were assigned and/or the property re-let) would have to remain the tenant for just over 14 years. If not, if any future tenant within that 14 year period is of a lesser calibre, then the value of the property would be less (all other factors remaining constant). 

Buying a property let on 20 year lease is not the answer. Generally, retail property is a depreciating asset and the shorter the term the greater the yield. A property let to Barclays Bank plc, for example, on leaseback for 20 years from 2009 will likely fetch a higher price than if the term remaining is only a few years before expiry. 

There is a difference between the return or yield you can get based on what you pay and whether the investment is worth buying in the first place. I think many people are not realising they are falling into the trap of the first. And it is a trap, believe me, because what it leads to is becoming stuck with something that is really only resalable at the same sort of price now. 

Jun 2009 – As I say time and again, essentially, a problem is a fault in direction which, when left to its own devices, may fragment into seemingly different problems, so as to attract attention. It is not enough to resolve a problem: it must be transformed. Finding a solution simply dilutes the problem, until it is bearable. It is not enough to alter perception: when symptoms are merely relieved, the problem will crop up again.

Transformation is a thorough, possibly dramatic, change in underlying attitude. In my healing experience, such as it is, few people are adept at transforming problems into commercial opportunities as they go. Mostly, people metaphorically brush problems under the carpet, ignore them and hope they’ll go away. They don’t. The problem waits for an opportunity to arise again, often in different guises. When you have an unresolved problem, you will not progress. You, your business, are stuck.

A problem at micro-level becomes a macro large-scale. In CR (QC06) December 1985, I said “Costs in the property industry have reached record levels. The actual amount of money involved in day-to-day transactions imposes constant pressure to meet critical financial targets. Any attempt to question or stop is met by a barrage of vested interests intent upon maintaining momentum. The cost of error is rapidly reaching the point whereby individual foresight will be crushed by the weight of uncontrollable dynamism. In the prime shop market, the corporate income of some retailers is inextricably bound up with the consumer’s willingness to keep on spending on credit. It only needs a few months’ lull for the structure to crack under the weight of operating costs. ”

And in CR50, June 1998, “When retailers get carried away and form the wrong impression of reality, the knock-on effect is destabilisation. Flat demand is caused by an addiction to competition. ”

Generally, retailers don’t care where the money comes from. As long as it does. As long as the business plan is approved by the bank and facilities can be renewed, as long as customers can be persuaded to spend more, as long as the lust for more shops can be satisfied, as long as landlords can be dumped or treated like any other supplier, that’s all that matters. Operating in splendid isolation, indifference to the wider long-term consequences cannot be appeased by giving to charity: playing power-games, bullying tactics, is completely the wrong approach for long-term consistent success.

Not only retailers, but also landlords and surveyors have fallen down the slippery slope. Indifference to repercussions of pro-active asset management, over-developing, over-estimating values, manipulating rents, it all fuels the get-rich-quick mentality, and the greed has so rotted the core that they’re going cap in hand to shareholders and banks for more money to feed the cravings.

It’s not the market’s fault. That is akin to admonishing customers, the source of spending-power. It’s not that the market suddenly turned, or no one could have foreseen. The direction had been changing for years. It merely needed to tip the balance. It was foreseen, but warnings went unheeded. Views like mine are not what most people want to hear. In December 1985, I said “success in retailing today is too dependent upon the availability of credit. Credit enables retailers to control the concept of what represents value for money. “ As I said in June 1998, “the cost of prejudice: a preference for conformity. It is thinking problems are normal. “

Credit interferes with the law of balance. It increases the money-supply artificially. You cannot blow something out of all proportion and expect it to stay there. A time must arrive when it bursts, a point at which it is so fed up it cannot contain itself. In my opinion, the bubble was about to burst in mid-2004, but greed gave it a final blow. In April 2008, as I put in my blog “in my opinion, the sub-prime crisis was deliberately orchestrated by some very shrewd operators who have made trillions of $ or whatever out of the debacle. ” Be that as it may, the credit-crunch has highlighted just how much pretentiousness exists.

Credit creates its own vicious circle of spiralling costs. Artificial growth, opening more shops, for than fair share, gives an impression of strong demand, thereby attracting competitors, which in turn increases pressure for performance. The terms of a loan can restrict the freedom to synchronise with reality: the direction in which customers are going. Businesses and properties exist to serve customers: not the other way round.

Borrowing is considered par for the course, but whereas it is okay to want a helping hand to begin with, there comes a point surely, when a business ought to stand on its own feet? In my opinion, for a business to consider itself successful it should have no need of debt. That is not to say it should not have any borrowing facility, simply it should rarely need to use it. The credit crunch shows just how much businesses that depend on borrowing have become a drag. In the aftermath of years of a booming economy, that few businesses have amassed cash confirms most directors are more interested in lining their own pockets and “living the life of Riley” than ploughing the profits into the business.

The money has to come from somewhere. To live off borrowings, assuming they would always be replenished on the strength of the business plan, is the result of allowing the art of avoiding challenging questions to run companies. It is a wonder of the pyramid, whereby the person in charge surrounds themselves with layers of management, so as to create the illusion that person must be very talented. Not realising the light at the end of the tunnel could be the train coming towards you can lead to a series of mistakes that start when someone is sold on an idea and there is no stopping them. By the time the idea is up and running, it is failing all over the place and costing a packet.

I think it’s sad, not to mention a waste of resources, that retailers and landlords are obliged to fail, and for shareholders to suffer, before directors will learn how to listen. Perhaps it’s hardly surprising: their contemporaries are on the same wavelength: standing firm and resolute on a massive psychological block A clean-sweep is necessary: to remove from positions of power those that need tangible evidence before they’ll act.

Fact is when you ignore the signs and don’t change willingly, change will be forced upon you. It’s as simple as that.

For long-term consistent success, to be progressive, to avoid coming unstuck in times of change, you have to think deeply and not allow superficial influences to cloud your judgement. As I say on my web site, “I think it important to have a feel for what you do, because then you can find your way around in the dark”. It is clear to me what is happening. It’s a shift, to living true to form and allowing business development to unfold naturally. In other words, “This above all: To thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man. “ – William Shakespeare, (1564-1616)

Jun 2009 – Now the credit-crunch has settled, landlords have a rare, possibly unique, opportunity to determine the future of retailing, for good.

As I see it, a lot of hard-working decent honourable tenants, good at what they do, have found their property costs inflated as a result of the legacy of a bunch of irresponsible retailers who, operating in splendid isolation, behaved like drunken idiots by throwing their weight around when they could borrow lots and go on a spending spree, but are no longer full of confidence now the money-tap is turned off. Indeed, with balance-sheets hung up for all to see, it is interesting just how many retailers are heavily indebted. Which makes one wonder where all the money went.

Let’s face it, an awful lot of multiple retailers are not as good as they like to think, and many were struggling before recession arrived. It’s also fascinating how many multiple retailers think the world owes them a living. And how fond they are of blaming rent, rates, the economy, for their loss-making. The truth is a failure to address operational difficulties. It’s easy to manage without coming unstuck in times of change, so not getting the formula right is tantamount to gross negligence at the highest level. It is not as though there is no money about. You only have to look at turnover figures to see how much is spent.

Every retailer thinks it has a unique selling proposition, but, actually, there is hardly any originality, and copycat merchandise is in overdrive. The shopping public is doing its bit by not spending indiscriminately, and supermarkets are making life hell for those that think themselves so heavenly wonderful but are no earthly good, but landlords are in a position to accelerate change. One might think failing retailers are helping too, using pre-pack administration and CVA to prune branches, but pre-pack is about yesteryear directors out for whatever they can get.

You may think I’m off my rocker, or living on another planet, but this is no ordinary downturn. Things will never go back to how they were. It’s a shift, to a entirely different set of values and way of doing business. Which is why, in my view, landlords should seize the opportunity to rid us of all the retailers that have got us into this mess, and instead re-let the shops, even if it means lower rents, to those that understand the difference between running a business and managing for long-term consistent success.

Mar 2009 – Acting for a trustee of a restaurant property in East London, I was instructed to advise and take over negotiations for a rent review where the landlord’s previous surveyor had failed to serve a valid notice and the tenant’s surveyor had questioned the effective date of the review. The trustee’s solicitors had sought to remedy the situation by serving a fresh notice but overdid it by including wording that strayed from the lease; the tenant’s surveyor was also questioning the validity of the second notice.

According to the lease, the landlord has the right, on giving the tenant at least one month’s notice, to review the yearly rent, the revised rent to be payable from the review date. If the rent had not been reviewed at a date of review then the landlord shall at any time thereafter have the right to review the rent, upon giving not less than one month’s notice in writing, and from the date specified in that notice (not earlier than one month from the date of service of the notice) the yearly rent shall be increased at the date specified in that notice.

The timing of the landlord’s notice in the first instance was not of the essence, but it could be reasoned the subsequent procedure for giving notice renders that first instance of the essence. Only the landlord had the right to start the review procedure, but business tenancy law provides a means for the tenant to force the landlord to start or lose the right. Also, there was a similarity with the situation in H Turner & Son Ltd v Confederation Insurance Co (UK) Ltd and another [2002]. In Turner, it was held that the provision for service of a late rent review notice after the end of the period of the ‘main’ rent review notice made time of the essence in relation to the ‘main’ notice.

It would have been possible for the draftsman of the lease to avoid time of the essence simply by using different wording. To have two separate procedures struck me as cumbersome. My own view is the subsequent procedure, apart from overcoming the situation had the first procedure not been followed, may have been intended to benefit the landlord to time the implementation of the review to the state of the market then prevailing and, since that would be to the detriment of the tenant, the benefit for the tenant in agreeing is that the increased rent would not be back-dated to the first instance review date. However, that would pre-suppose the valuation date would also be the date specified in the subsequent notice. Assuming the time of the first instance notice is of the essence, the right to review the rent at the express review date would be lost if notice were not given in time.

Rather than get embroiled in the legalities and the risk to the landlord of losing the right to review entirely, I persuaded the tenant’s surveyor to drop the challenge of validity in exchange for the later review date.

Mar 2009 – My letter published in Estates Gazette, March 2009:
“Whilst I agree with Anthony Ratcliffe there seems precious little difference between “phoenix” company and “pre-packs”, I do think landlords could do both themselves and the shop property sector a service by adopting a more robust approach to requests for assignment.

Generally, alienation criteria in a lease enable a landlord to require a director surety or guarantor as a pre-requisite for consent for assignment. Generally, multiple retailers are unwilling to provide personal guarantors but, since the pre-pack company is effectively a new business with no trading record, there is no reason to treat it any differently.

In my opinion, landlords are being presented with a rare possibly unique opportunity to influence the future of retailing and the structure of property costs in the UK. By refusing consent to assign to a pre-pack unless personal guarantor(s) are provided, multiple retailers are less likely to embark upon debt-fuelled jamborees, if their own personal money were on the line. One reason there is now a legacy of high rents in most places is not a consequence of supply and demand, so much as the knock-on effect of rental evidence caused overambitious egocentric retailers living off borrowings and overpaying for new lettings with no thought for the long-term wider consequences.

Increasingly, I am taking the view that comparable evidence at rent review involving a transaction where the lease is to a company without a personal guarantor should be treated with the utmost caution, because the rent is likely to be higher.

In my opinion, multiple retailers allowing branches to under-perform, such that they have to be ditched using pre-packaged practices, is tantamount to gross incompetence at the highest level. It is also a poor reflection on the investment acumen of innumerable landlords in allowing multiple retailers to be exempt or shielded from the strictures of tenancy management that are automatically applied to small businesses.”

Dec 1999 – In the open market, some retailers, for whatever reason, can afford to pay suppliers – ie, landlords – more rent than others. Whilst each individual agreement is nothing to do with anyone other than the parties involved, rising property costs for everyone suggests something fundamentally wrong. 

The obvious problem is that, because leasing terms and upward-only reviews can remain fixed for years, no account can be taken of unforeseen consequences, such as external conditions or centre landlords not fulfilling promises. Varying a lease can require one party to give up advantage but, whilst immediate saving is relevant to tenants, landlords often receive the real benefit. (Consider the Landlord and Tenant (Covenants) Act 1995: removing privity of contract from common law to help a few victims means all tenants now considerably worse off.) The only time that reality is taken into account is at rent review and lease renewal, but even then landlords prefer hypothesis because, as lease analysis works both ways, connotations conveying advantages to the tenant can undermine investment performance, so may landlords manipulate evidence to avoid the possibility that they should experience the sort of insecurities and uncertainties that tenants face daily.  

Another is indifference. Landlords can find out from other landlords what other tenants have agreed, but the main source is surveyors who see no harm in keeping landlords informed. It is reasoned that freely circulating evidence is the market’s ‘life-blood’ so in everyone’s interest to co-operate.  The truth is that landlords and surveyors want tenants to play the property game by landlord rules. Denied knowledge of what other tenants are paying puts landlords at a disadvantage so surveyors, who also act for landlords, do not want tenants to opt out. Many tenants are themselves landlords and do not want to be alienated, but retailers would help themselves if transactions were not publicised, rental evidence disclosed only to surveyors reducing costs; and in a new lease and on renewal, require a covenant subjecting to tenant’s consent the release of tenancy facts to third parties. 

Tenant demand also increases costs. Retailing is dynamic – the test of an idea is consumer response, not what Verdict thinks – so supply of suitable shops can be limited, especially in prime positions, but retailers create problems for themselves by thinking short-term. Passing trade is generally regarded as common property but, actually, most retailers rely more on passing trade generated by a few. By paying more rent, a hungry retailer raises the stakes and, via the knock-on effect of upward-only review, pressurises both competitors and complementary businesses. When controlling tenant-mix, landlords may deliberately let shops to ‘novelty’ retailers at higher rents to force out those retailers no longer regarded as complementary to investment objectives. Whatever the strategy, the downside is that, when trading expectations do not materialise, the troubled retailer is stuck with a liability, but the consequences also destabilise prospects for those retailers whose appeal to shoppers was, in fact, the source of the footfall. In secondary locations, ‘amateurs’ hoping to cash in boosted costs beyond economical and the trend is now damaging prime positions and malls. 

Landlords expect tenants to adapt, but why should retailers affected by uneconomical costs be accommodating? No longer is the answer ‘nowhere else to go’, because the progressive are discovering two pleasures of relationship marketing – ie, why help other retailers and bother with the mass market? As forward-thinking retailers join the exodus, parasites expecting rich pickings to continue indefinitely are instead caught in a vicious circle of falling demand and rising costs. For landlords, pain is dearth of impervious multiples or independents with ‘deep pockets’. Everything boils down to attitudes, but that so many retailers are now experiencing lower profits suggests they and their surveyors are better at thinking like landlords – or simply not thinking it through at all.  

Jun 1999 – Socially, “win-win” as a means of avoiding or diffusing argument is useful as a catalyst but, at rent review, I regard it as inappropriate, because the intention is pre-determined as the open market rent: ie, what other retailers would pay for the premises. Whilst landlords would like all tenants to conform to the property system’s logical expectations, a tenant not actually in competition for the premises gains nothing from paying the going rate.

Even so, many tenants lose out because “win-win” has become institutionalised amongst surveyors so that, instead of concentrating on reduction, the emphasis is on agreeing market rent. Whilst the guidelines are geared towards that objective, the interests of landlord and tenant are opposed so, assuming an upward-only review, rather than reducing the proposal, I focus on passing rent. Clients also benefit indirectly in that their premises become more marketable, because when I release information for comparable evidence, landlord and surveyor opponents elsewhere invariably discount the devaluation. For example, I concluded a March 1999 review in Cornmarket, Oxford at under £180 Zone-A when Gap, almost next door, paid over £204 headline Zone-A in July 1998 and Birthdays nearby agreed 15% more on review in September 1998. Similarly, in North End, Croydon, I negotiated a March 1998 renewal at £125 Zone-A when, almost next door, an independent expert determined Zone-A £140 at the same date.

I am often instructed as a trouble-shooter and, in such cases, am fascinated by what the parties have taken for granted. If my experience reflects the market as a whole, then scope for further reducing property costs could be enormous. For example, many surveyors have difficulty in carrying out their instructions because of conflict between truth and bluff. To compensate, they can throw their weight around but, to retain peace of mind, sabotage the result. For example, I was embroiled with a surveyor whose stance was ‘take-it-or-leave-it’. He insisted that I should agree his floor areas because they were agreed on earlier occasions with chartered surveyors. On my calculations, verified afterwards by another surveyor not previously involved, the landlord’s surveyor’s area was wrong and the rent ,£4000 a year too low. In another matter, a landlord has been asserting the right to review after 3 years delay and, legally, was right. However, I resisted so, after a year or so getting nowhere with me, the landlord instructed a surveyor who told me that, whilst he agreed with my contention that the right had been lost, it would be a gesture to pay more – because that would be “fair”.

Apart from finding angles, I am good at reading between the lines and listening to what is not said. Concerned about the effect on the investment, landlords can be human although, in prime positions, resemblance is unusual, so one must be careful not to be emotional or mention their desire to recoup losses from pension mis-selling. Some landlords need cash flow, others scared of voids, and many surveyors have fee targets so agreement takes priority over doing their best for clients. Also, I have no duty to protect retailers for whom I am not acting, so it may be possible to achieve a good deal for my Client that would support an increase on rent for a neighbouring retailer and, if in competition with my Client, then even better!

Reading between the lines is easier now that the standard of literacy amongst surveyors has fallen. I regard anyone who spells its as it’s, in the context of its, as a sitting duck for a referral by written submission. But, because I dislike spending Client’s money, I prefer to serve by using technical skills and psychology constructively. In short, if you would like to pay less than the going rate, then I look forward to helping you in some way. Thank you.

June 1998. Retailing is a commitment to uncertainty. A long-term business plan is rarely straightforward. Anticipated events can be avoided, difficulties can reflect specific situations, but often the cause of problems is failure to empathise with the purpose of change. In general, problems arise when an expectation is out of sync with reality. Problems increase costs, reduce efficiency, generate stress, demoralise people, damage health, deter shoppers, and can lead to failure. Therefore, problems of any kind should not be regarded as normal.

In my philosophy, reflecting the inner relationship that we have with ourselves, we form relationships to help each other at some level. Some people may think that help is only given in exchange for something, but help that reflects integrity is unconditional – ie., free of emotional charge. Anything and anyone to whom you and your business are exposed will be helpful in some way. Often unsolicited, in unexpected guises, help arise literally and in double messages. The challenge is to understand and respond to all signals as you go. The way to transform problems into opportunities is to be emotionally detached and evaluate every angle – including the possibility that there may not be one. For example, what is the situation saying? Not why, but how is someone being helpful?.

People do business with people. Personality influences your choice of advisers. If, like Gordon Brown of Wilkinson Hardware Stores, you should sometimes think my comments offensive, then I apologise most sincerely. I have no desire to hurt anyone’s feelings. I forget that the retail ego can be fragile. As I delegate untoward remarks, made about me, to aspects of myself that require self improvement, I forget too that others may not be as understanding. Social diplomacy has never been my strong point and, being good at spotting problems, often years before they arise, blunt criticism is the only way that I know to illustrate a telling sign.

I may be too ambitious for the sceptical, but all I want to do is help retailers avoid problems. I love reducing shop property costs and minimising liabilities, but am also a healer. Whilst that gift could be regarded as a separate vocation, the benefit of integration is that integrity, derived from deep understanding, shows in my attitude towards your instructions. In negotiation, it is often possible to overcome objections, or undermine resistance, by using subtle techniques. I understand shops, my track record isexcellent, predictions are reliable and I am full of useful ideas. My talent for transforming relationship problems into commercial opportunities will help improve performance. If you are not yet a client then I should like to receive your property instructions but if you have advisers, then I should be pleased to write articles for in-house journals, or talk to managers and staff at training sessions. In short, the benefit of my services is direct access to an unusual diversity of skills which will contribute far more than most towards the profitability of your business.

To combat flat demand, and rising costs, retailers face a major challenge. As I feel able to help, I am devoting most of this 50th newsletter to business development. I look forward to helping you in some way.

Writing on the Wall

In June 1989, I said that the emergence of the ‘Green’ consumer marked the onset of a major shift in attitude that would have repercussions for all aspects of future retailing. In attitude, ignoring sub-personalities, each person is said to be three different people. (1) – The person whom they think others think them to be. (2) – The person who they think they are. (3) – The true ‘self’. Since behaving as others expect is no longer sacrosanct, one-third demand is fading. In the normal course of social transformation, money saved by discarding (1) would be spent on (2). However, whereas retailers may not be in a hurry to change, customers are. Thus, unbeknown to many retailers, an avalanche of people is going straight to (3) – i.e., being themselves.

In essence, change about connecting to truth. Through being ourselves and alone, and not someone else and lonely, we are more likely to achieve aspirations. The short-term goal is independence, but the ambition is interdependency – i.e. contributing our uniqueness towards a common purpose in conjunction with others having complementary gifts. Like attracts like. To appeal to and retain customers on a permanent basis the challenge is to function true to form. Truth is one’s path, or direction. Form is manifestation of one’s potential. Potential is the feeling that only you, and your business, can do something. Thought controls intention & action, feelings govern timing and direction. Intuition prevents us from going wrong. In self and business development, we evolve through experience and, subconsciously, store experiences by reference to similar first experiences. As knowing what to do is not always obvious, we form relationships to help each other. Other ‘see’ situations differently. In relationship, flexible attitudes are vital. Progress reflects self-confidence in use of guidelines. Therefore, to reap rewards and enjoy peace of mind requires honest communication at all times.

Teams and groups fail when people are uncomfortable with power. To understand the purpose of change requires a balance perspective. A relationship is a basis for development. In an honest relationship, needs adjust like feet on weighing scales. If uneven, then the balance is upset, and the result wrong. When a relationship fails, dishonesty has caused misunderstanding. Mistakes can lead us astray. After 3 days, to ease pressure of disorientation, we detach ourselves from reality. In a prejudicial state, we rely on the logic of past experience and lose touch with our feelings. To help maintain our direction, a problem arises. Decipher the signal. Change. Easier said than done? When self-confidence is damaged by upbringing or society, immunity to indoctrination sufferers. Thus, through force of circumstances, most people abandon their dreams and rely for fulfilment on those who do not. In the firing line of that reality, two issues are aggravating the bottom line:

1 – Quality people are intolerant of outmoded attitudes in supervisors and employers. Despite male domination of the parameters, retail reality is a woman’s world. The manageress of a client’s shop said that if only more men would agree, then so much more could be achieved. Her problem was how to get the message across to an area manager whose resistance to stock distribution is frustrating sales target. When I suggested that she should contact a director, she said that company policy forbids it. She has given up and customers go elsewhere.

2 – Unaddressed tendencies that sabotage profitability. Resisting change creates headaches. In 1997, in my talk to the West Midlands branch of the Institute of Personnel & Development, I said that customer- centred marketing was the cause of stress in companies. In the 80-strong audience, a few people understood that self expression is not reserved for customers. Policies that oblige staff to bottle up feelings, or act like zombies, fuel resentment and shrinkage. At senior level, amongst people responsible for spending money, complacency and defiance is rife. Indifference is aggravated by advisers about your money. Some retailers may have a job to keep up but, in reality, customers know where they are going to be oneself, ideally, achieve one’s purpose in life our benchmarks to which people naturally expire demand is for problem free, long lasting, user friendly products and service services – provided by reliable retailers. Bargains attract but indiscriminate spending is out. People want to feel good about everything. Mass market techniques are un enticing. Respect for each customer is profitable. As retailers reduce suppliers so, for cost time effectiveness, customers use fewer retailers and towns. Loyalty? Free of charge to all who understand.

The Cost of Prejudice
Mass marketers prefer conformity – conflict between fear and love is susceptible to persuasion – but the trend is a self identity. In transition, self-confidence fluctuates and customers can be reactionary. As personalities integrate, shifting psychological blogs may release emotional pain, so attitudes are unpredictable. Browsing increases. Demand is driven by impulse. For cash-flow, retailers promote addiction to stimuli – e.g., chocolate, alcohol, mobile phones, coffee shops, health, fitness. etc. To capitalise, ideas spread like wildfire but not every idea will benefit your business. Pursuit of profit at the expense of love damages relationships. For example example supermarket who looks good, but that’loyalty cards denote an experience without depth.

In the quest for revenue, enthusiasm is infectious. Euphoria is fabulous for landlords, but bad for retailers. The ‘Diana effect’ warns retailers of the danger of spontaneous feelings. When costs are geared to projections based on surges in confidence, ignoring reality is expensive. On the balance sheet, property costs are commitments to blank-cheques. When retailers get carried away and form the wrong impression of reality, the knock-on effect is destabilisation. Cracks are showing. From Retail Week (8 May 1998), based on a report by Ernst & Young, 88 companies – 17% of all quoted retailers – issued profit warnings in the first quarter of the year.

Flat demand is caused by addiction to competition. Blips can be seasonal, but a slow-down generally advocates urgent improvement in corporate self development. The typical male approach to relationship is to play power-games and be economical with truth. Fear of being found out causes an emotional dysfunction. When drive is geared to positive initiatives, its energy simultaneously feeds negative tendencies, generating friction in relationship and sabotaging objectives. In a woman’s world, while a shop ‘physique’ can make the mouth water, demand is for honest communication. To understand the benefit in help requires empathy. A successful relationship is based on unconditional interdependency – i.e. contribution and co-operation towards its purpose. Demand returns when retailers offer excellent value throughout the relationship. Authentic formats, happy atmosphere, socially competent staff, quality products, plus modern professional attitudes in relationship, create an irresistible experience.

It is reported that the retail market is undergoing a process of consolidation, polarising rental growth to an extent not experienced before. According to Hillier Parker, the shopper is concentrating spending in fewer locations and rental growth is not expected to ripple out indiscriminately from the main centres as in the 1980s. HP suggests that ensuing rental growth should be welcomed by retailers, because falling rents are assumed to be a proxy for deteriorating locations. Whilst I disagree that all retailers should want to pay more rent, just because some are falling over themselves to imagine that they can’t or won’t go wrong, the lethal combination of rising costs and flat demand suggest that the shopper is concentrating on fewer retailers.

Social transformation – i.e. everyone being themselves – will take another 10-25 years to complete. In the meantime, retailers could follow customers. For cost-effectiveness, it is best to go straight to the heart of the issue, rather than change one step at a time. Although easier to copy the originate, the prospect of failure and managerial boredom is greater among retailers who compete with each other. Modelling a business strategy on others and relying on someone else for direction will cloud intuition and generate problems. You can offer ‘3 for the price of 2’ but it should be 3 for the price of 1 – then stop stocking the extra 2. In the long-term when people are rid of whatever terms them off, and technology and home-delivery handle routine, net demand will not sustain all the manufacturers, suppliers, products, retailers, shops, or shopping centres, that exist today.

Over technology, competition, and double standards, the enlightened retailer has an invincible advantage. Depth of feeling in relationship and a useful purpose. At a truthful level of understanding, the formula is retail ‘self’ in partnership with customers, sharing the experience of ‘gifts’ in transactions, via the sale of products and exchange of help. In practice, the challenge is to concentrate on becoming a destination retailer – so that, regardless of competitors or competitive influences, people will only ever want to buy from you.

Sep 1985. In a period of ‘retailing revolution’, one wonders how advisers to pension funds can be so confident that the rate of growth essential to justify low initial yield on purchase price will materialise of the review date. Many funds are already becoming increasingly disillusioned with their agents’ failure to achieve the anticipated rental value.

When the same agencies also act for multiple retailers, how do they reconcile their objective for the lowest rental when they may also be acting for the landlord of the adjoining property with a brief to get the highest rent?

This conflict exists for all valuers,, likely to receive instructions to advise landlords and tenants in the same area, but it is surmountable when there is no vested interest in the progress of the investment.

Detailed knowledge of a multiple retailers’ property affairs must be very useful when advising a fund on investment purchase (not to mention on the company’s takeover potential) and the solution appears to aim for a balance, tilted in favour of the landlord, whereby ‘comparable evidence’ to back a recommendation to settle, is presented in such a form as to convince the tenant that the conclusion is indeed the right figure, in line with ‘the market’.

I cannot understand the business philosophy of major multiple retailers who appear unconcerned that their retained advisers actively market a positive involvement in the investment market. Surely it is better to use a selection of different valuers or, at worst, to deal with negotiations internally?

Jun 1985 – The role of the valuer, at a rent review or lease renewal, is to argue for his client’s best interests and for the tenant, ‘best’ generally means the lowest rental. Most landlords and tenants get frustrated by the complexity of the rent review system, but many small tenants are expressing their annoyance by not honouring payment of the valuer’s fees. As a valuer is not personally responsible for rent levels and since most people confuse the withholding of payment with the need for confrontation when dissatisfied with goods or services, non-payment, by an otherwise solvent tenant, suggests that a major factor may lie in misunderstanding the role of the professional adviser.

As over 90% of my fee income comes from landlords and multiple retailers, my direct involvement with small tenants is limited, but discussion with other valuers, more dependent upon this source for their review instructions, suggests a growing problem. The small tenant’s knowledge of rent review law is likely to be very limited and confined to a range of popular suppositions, many of which are contrary to review law. In considering advice, the tenant will recognise that many aspects of rent review law are too complex for a layman to understand. So, in accepting recommendations, it is important for the tenant to have established mutual respect for his adviser so that, if understanding principles is not always possible, the tenant can still be confident the valuer has done the best job. For example, a most common problem is that tenants do not realise the rent is assessed by reference to the worth of the premises and not to the economics of the business. Since the tenant’s prosperity is inter-related with the level of rent, rational acknowledgement of this critical concept cannot compete with the absence of emotional appreciation when the outcome exceeds the tenant’s expectations.  

It is all very well for the law and hence valuers to view rent objectively, but it is the tenant who has to find the money. Any reduction in net profit highlights the parallel with national unemployment when operating revenue no longer supports a full workforce. Assignment is too glib a suggestion, as many middle-aged individual tenants lack the energy or enthusiasm to relocate established businesses. Too many valuers do not make it clear precisely what their role is when taking instructions. It is a pity they allow their instinctive compassion for the tenant’s cause to cloud perspective. The valuer gets caught in the quandary between, on the one hand, fighting to achieve the tenant’s expectations and on the other, privately and technically surrendering to the substance of the opponent’s argument. By allowing reality to take second place to the tenant’s expectations, the valuer is no longer an adviser but an up-market messenger boy. The fact that many small tenants are openly caustic about the waste of money in instructing valuers adds to general disillusionment.

Only by ensuring that the client is kept informed, including explanation of technical factors, can the client recognise that  every effort is being made on his behalf so that the outcome is not the valuer’s fault. In this way, the guilt for non-payment remains with the client. 

Fee structures create their own problems. Incentive fees are not a guarantee of ability to pay, since the gap between the landlord’s proposal and the expected result does not exist in physical monetary terms. Some people believe that the more a valuer can earn, the more he is motivated to try for the lowest rent and at the back of their minds also is the awareness that if the result conflicts with expectations, the valuer will share in the tenant’s disappointment and not have his fees underpinned by the base settlement figure. In my opinion, the sole criterion for choice is the skill of the valuer and the method of payment should take second place, but in a ‘performance related perk-free society’ this attitude clearly places too much on trust!

The small tenant’s method of protest against the ‘injustices’ in the system is, in prosperous areas, to assign the lease so that, in the tenant’s view, the landlord loses the security of an established tenant (often in exchange for a debt-ridden newcomer) and, in the rest of the country, simple non-payment of rent. This invites the landlord to go for possession, which is often the last thing the landlord wants to do, for fear the premises will remain empty. The growing cacophony of inexperienced shopkeepers is witness to the widening gulf between competent professional valuers and parochial general practitioners.

Jun 1985 – The current trend for private investors in the retail market to be more concerned with short-term gain than long-term income is worrying. Participants seem to have overlooked the fact that the essence in capital gain to date owes more to previous levels of inflation than to design. And even if high inflation does return, the retailing revolution will stultify any likelihood of a repeat boom.

Many new investors believe that rental value reflects expected investment yield, based upon the price they have paid. In fact, investment value is calculated by reference to the level of rent and not vice versa. However, high prices paid for some investments can only reflect a very optimistic view of rental value. With the exception of property formerly owned by notedly cautious landlords, the idea that the previous owner must have agreed too low a rent, especially if set during the period 1981-1983, is too simplistic. By having always to aim for the top rental on review, to cover purchasing expectations, any failure to achieve the objective rubs off on the relationship with the valuer whose advice is dismissed as ‘negative.’

The tenant becomes saddled with a difficult landlord and often with a rental commitment far above the economics of his business. In the open market, cyclical change is inevitable, but in the quest for short term gain, while the loss of one particular tenant may not matter, it is the collective effect of the pressure for high rents, which radically affects long-term stability, since there cannot be capital gain without security of income.

In the past, investment values have had a useful way of adjusting to their owners’ mistakes, but with changes in the pattern of retailing, low inflation  and high-interest rates, the margin for error now is very small.  

The investor who overpays, through ignorance or greed, only to find that the resultant yield, following review, is well below the comfortable resale price will have to fund the shortfall somehow. While it is churlish to insist upon strict consideration of investment criteria, since the pressure to use substantial borrowing facilities dominates the market, the problem is unlikely to grow.

Jun 1985 – Thinking I was immune from advertising, my first trip to what has now become my local grocers was to satisfy professional curiosity but standing in the car park at Tesco’s 100th superstore, I was comfortably aware of some magnetic presence which has brightened up Neasden.

For those of us who thrive on fresh fruit and vegetables, it is paradise to be offered such a wide choice and although the quality may not always be up to Class I, the assortment easily compensates.

I gauge shops by the quality of the staff and my definition of service. Are they dressed nicely, do they smile when serving or look at the customer at the till? So used to staff indifference at the International, opposite my office, it came as a refreshing change to hear ‘thank you sir’ when having my vegetables weighed and priced. For the best service, however, I don’t believe you can beat Waitrose. When I asked a supervisor at Waitrose Brent Cross for some help, she stopped what she was doing and promptly showed me to the stock. At Tesco however, the same situation was delegated by the supervisor so presumably she had more important things to do than serve a customer!

Living in the area means we are spoilt for choice amongst the supermarket majors. Asda Hendon is due open next year although it’ll probably be as unimpressive as Park Royal. Gateway has just opened in far-away Willesden and there’s Safeway, but we went there once and the getting any common sense out of the staff was clearly going to create problems. Sainsbury’ s puts me off because, apart from never being able to find anything, their male staff can often be seen with their ties hanging off their collars which I think is sloppy. These may sound like little things but it’s the little things that deter customers otherwise we’d all shop at the same place!

Returning to Tesco, the fact that the staff can be seen to like saying ‘thank you’ is sufficient recommendation although I do have my doubts whether they are as enthusiastic during the peak and horrific Friday & Saturday shopping periods.

The clear reduction in our weekly food bill in exchange for a wide assortment, easy parking and a relaxing shopping environment must be the recipe for future grocery retailing; I must remember to modify my remarks about people who shop at Tesco. It’s blatantly obvious however that the store is only accessible to motorists but it’s spending power that Tesco is after and not local convenience. Let’s hope the staff travelling to work via Neasden Station don’t, as is very likely, get mugged in the long friendless walk to the store. Even if you can resist temptation, it must be worth a detour off the North Circular Road to buy 4 star petrol at 192.3p a gallon

Jun 1985 – In a period of ‘retailing revolution,’ one wonders how advisers to pension funds can be so confident that the rate of growth essential to justify low initial yields on purchase price will materialise at the review date.

Many funds are already becoming increasingly disillusioned with their agents’ failure to achieve the anticipated rental value. When the same agencies also act for multiple retailers, how do they reconcile their objective for the lowest rental when they may also be acting for the landlord of adjoining property with a brief to get the highest rental?

This conflict exists for all valuers, likely to receive instructions to advise landlords and tenants in the same area, but it is surmountable when there is no vested interest in the progress of the investment.

Detailed knowledge of a multiple retailers’ property affairs must be very useful when advising a fund on investment purchase (not to mention on the company’s take-over potential) and the solution appears to aim for a balance, tilted in favour of the landlord, whereby ‘comparable evidence,’ to back a recommendation to settle, is presented in such a form as to convince the tenant that the conclusion is indeed the right figure, in line with ‘the market.’

I cannot understand the business philosophy of major multiple retailers who appear unconcerned that their retained advisers actively market a positive involvement in the investment market. Surely it is better to use a selection of different valuers or, at worst, to deal with negotiations internally.

Jun 1985 – In Shirlcar Properties Ltd v Heinitz & Another [1982], the Court stated stated that use of the expression ‘subject to contract’ did not constitute effective notice to set a rent review procedure in motion when formal notice had to be given. Use of the expression ‘without prejudice’ is widely misunderstood and so it comes as no real surprise to find that many surveyors are unable to grasp the effect of such wording when concluding rent review negotiations.

An offer made ‘without prejudice’ is binding if acceptance of the offer is made. By adding the words ‘ subject to contract,’ however, the presumption that the parties intend to create legal relations may be expressly negatived. From Rose & Frank v ] R Crompton Ltd [1923], “the words of the preliminary agreement in other respects may be apt and sufficient to constitute an open contract, but if the parties in so agreeing make it plain that they do not intend to be bound except by some subsequent document, they remain unbound though no further negotiation be contemplated. Either side is free to abandon the agreement and to refuse to assent to any legal obligation …. “

When concluding negotiations, it is common for valuers to head the correspondence ‘without prejudice’ (and/or) ‘subject to contract.’ In such cases, the concluded rental will be subject to the valuer’s recommendation of acceptance. This reservation in itself is sufficient evidence that no formal agreement has been reached, even if the recommendation refers to the need for ‘Board approval’ reckoned to be a formality. Until an offer is made without reservation, it is not agreed and some valuers and parties feel that withdrawal from the ‘conclusion’ is tantamount to unethical or unprofessional behaviour against the spirit of negotiation. Such opinion is, of course, the prerogative of the aggrieved party but it does not affect the legal position and, whereas such practice may conflict with expectations, valuers must recognise that the law applies as much to the interpretation of rent review covenants as it does to negotiations.

Dec 1984 – Now that solicitors (and accountants) are allowed to advertise, it is interesting to observe how a professional group responds to the challenge.

Advertising in the property market is so much a part of the furniture that it is difficult to remember that corporate advertising is still relatively novel. To market an intangible asset is a difficult task. The nature of service is dictated by the market and most Clients expect certain basic criteria. Any departure from this ‘norm’ reflects either the firm’s inventiveness or inefficiency. The choice of a professional adviser owes much to personality and prejudice, and no amount of corporate advertising is going to influence a prospective Client whose sights are set elsewhere.

At the bottom end of the market, the level of fees dominates decisions and no doubt many solicitors have realised that by cutting fees to encourage additional instructions, response will come from this source. However, low fees are only profitable in conjunction with high volume and one of the snags with official competition is that it dilutes volume.

Response to corporate advertising is rarely immediate. Marketing must be planned and a strategy formulated, as the occasional advertisement is a waste of money. The first principle in marketing is to define the market and in repeating this, the professional marketing lecturers often miss the point that not every company wants to participate in every sector of the market and that indifferent attitudes may be a deliberate policy for deterring unwanted enquirers.

The cost of advertising is generally sold by diving the cost of the space by the circulation or audited readership. This is very misleading, in practice because the position in a suitable publication is usually the key factor and not just simple presence.

Advertising is addictive; once started, there is always the feeling that it is difficult to stop, ‘just in case.’ Furthermore, many people make a mental note of corporate advertising for future reference so that one is paying out money now for potential future business. In my experience, most corporate display advertising is a waste of but essential use of money! Repetition of a theme creates readership immunity and it is only when the reader has a need for the service that contact is made. This highlights the difference between advertising and marketing. Advertising announces the availability of the product or service, whereas marketing does the selling, so a response to an advertisement must be treated with the same degree of importance that the copy in the advertising implies. If, for example, a personal service is advertised, then a personal response must be given to the enquiry.

I shall be very surprised if solicitors continue advertising for long. Most firms get a steady flow of new business and few are short term operators, which means they can afford to wait as their reputation grows naturally. Some firms do need a jolt so the competition is no bad thing, but I suspect the most important outcome of the relaxation in the advertising regulations will be the chance for firms to define their market.

Dec 1984 – The historic development of shopping centres makes fascinating reading. Originally, as people went to market, so came permanent shops. In the post-war housing boom, shops started going to the people and even today, new council housing estates boast a block of shops.

The radical change in socio-economic patterns, and the real decline in the cost of transport, means that today people go to the shops and the goodwill generated by the major operators in all sectors of the retailing market is sufficiently established to influence the prosperity of shopping centres.

When the idea of Brent Cross Shopping Centre was conceived in 1959, it would probably not have been anything like as successful a concept that it is today. In the early 1960’s, shopping development was confined to traditional shopping centres, and precincts, such as the Arndale Centres, were built on land fronting the High Streets. The first suggestion that people might be persuaded to shop away from the traditional pitches was introduced when the second-generation food supermarkets, such as Tesco and Sainsbury’s started to move to fringe positions to provide on-site parking and loading facilities for their customers.

The need for food is the common link between all people. As it is a perishable product, with people having limited facilities for bulk storage, shopping for food is the main reason why most shopping centres attract daily pedestrian flow. If you take away the food shops, technically known as convenience traders, you also remove the spin-off for durable and service traders.

It is clear that the future of food retailing lies in the free-standing purpose-built supermarket located in an accessible position and offering excellent parking and loading facilities. The strength of buying power for and competition between the major operators means that retail prices are particularly keen. The independent grocer has seen his market share decline gradually since the 1950s and butchers, greengrocers, off-licences, fishmongers have all been hit hard. The ubiquitous confectioner, tobacconist, newsagent only survives because the major wholesalers of newspapers operate retail CTN outlets themselves. The private retailer with expansion ambition knows that the future for retailing must be to take units in busy positions, which are not completely dependent upon the whims and loyalties of local custom.

The importance that the presence of a food supermarket has on shopping positions is still underestimated. The closure by the Co-Op of many neighbourhood supermarkets has had a devastating effect on many local centres. Like cigarette brands, people are loyal to their favourite supermarket group and even if the old ‘Tesco’ is replaced by an individual grocer, offfering the cliches of personal service and flexible opening hours, the damage is done. Local grocers won’t survive for ever on people buying a pound of butter at 10 pm. The key .to establishing some hold on the market is to contain costs, as there is always scope to participate in automatic local potential, especially as not everyone wants to shop at a superstore. In fact, the major groups are generally pleased that corner and local shops continue, because they operate in different markets and, of course, it would be political suicide to admit to their extinction. However, the products are still the same and most shoppers are price-conscious. The top supermarket operators invest in research. They plan well-ahead and committment to a development programme involving millions of pounds allows for the short term hurdles in favour of long term success.

In the same way that the institutional and major landlords are actively selling secondary shops, so the major and multiple groups are actively vacating obsolete trading positions. Apart from the food groups, the other enemies within (so far as the secondary market is concerned) are the DIY, furniture and electrical groups, such as MFI, Harris Queensway, Payless, Texas Homecare, Do-It-All, Comet, B&Q, Homebase, etc. Clamour for revision of the Sunday trading laws adds fuel to a fire which has already devastated the small retailer and is now creeping into the entire secondary centre.

This year’s CBI-FT figures for Christmas trading predictions mention the local shop’s expectations, for the first time. Any trip around secondary shopping centres this year would have indicated the noticeable absence of extra pedestrian flow. In my opinion, 1984’s Christmas trading period will mark the beginning of the secondary trader’s dread of this traditional time. 

In the past, all shopkeepers used to look forward to the seasonal upturn, but the rot started last year when shoppers spent a fortune in the High Streets and superstores and this year will prove no exception. Supporters of the relaxation in Sunday trading laws claim more consumer choice and new jobs. But it is blatantly obvious that the small retailer will be squeezed out by the major operators. Important shopping areas, like Oxford Street, will benefit, but the axe will fall on the rest. The new growth area for the unemployed will be the self-employed retailer, whose business is totally dependent upon pedestrian flow generated by the goodwill of others. Few local retailers actively market their stock; they are inter-dependent upon the collective benefit generated by being in a successful shopping centre and without the presence of national companies, generating national advertising and goodwill, there will be little incentive for local people to shop, except for the occasional item. The future for the secondary shop will rest upon the retailer’s personal ability as a retailer, highlighting the fact that few shop-keepers are retailers. The double glazing showrooms are a good example of a modern approach to retailing. They are shops for the visible storage of goods sold by the operator, through advertising and direct marketing. Too many shopkeepers have become complacent; they are used to people walking in automatically instead of actively attracting their interest.

If secondary centres do become the equivalent to an overcoat for shoppers – only needed when absolutely necessary – then the future expectations for investment growth must be limited. In establishing the future importance of a secondary centre, close attention should be paid to the size of the premises occupied by the supermarket operator to ensure it meets modern requirements and also upon the identity of the operator, as this defines the nature of the catchment area. It is important to monitor the locations in which the major operators take sites for their new stores. Most pop up in local and secondary areas because that is where land is most available. The benefit to the surrounding centres, however, will be dependent upon each individual retailer’s ability to capitalise on the presence of the extra pedestrian flow by gearing its corporate image to the needs of the people. Landlords have a role to play in maintaining the balance of trade in a secondary centre. On receipt of applications to change the user, the landlord should refuse consent if the proposed user appears to be in direct competition with established traders.

It comes as a shock to many individual shopkeepers to be told that the rent for the premises is not calculated by reference to their ability to pay it. The level of rents in many secondary centres has already reached a peak at which, combined with the effect of rates, ever increasing overheads and declining revenue, they are now seriously affecting the stability of the centre.

Careful choice for investment is fast becoming essential. There will always be opportunities for growth, but a blanket assumption that all secondary areas will continue to prosper is a fallacy. I predict that investors who expect the percentage increases in rents applicable in the five year period from 1979 to 1984 to be repeated for the latter part of this decade are likely to be very disappointed, despite the research!

Dec 1984 – It cannot come as much surprise to learn that Motorist Discount Centre, with some 300 shops selling motor accessories, has gone into receivership. With the notable exception of Kwik-Save, the northern-based supermarket group, nominal capital commitment to shop fitting is often a sign of a short-term trading philosophy. 

The acquisition of Cullens, a long-established family grocers, for around £BM is a classic example of a waste of money. I have no doubt the new owners are credible and enthusiastic but the cost of buying a loss-making enterprise in a declining sector of the grocery market is unjustified in valuation terms. Collier Menswear, the management buy-out of the John Collier group from UDS, following the Hanson take-over, is another example of the trend for loss-making operations to be accepted in the financial market. The investment market benefits from the many sale-and-leasebacks to raise funds, but it is pertinent to note that while the major multiples sell off their best assets for short-term support, J Sainsbury is only selling obsolete units.

Bargain of the year must be Dixons’ acquisition of Curry’s. Where Curry’s got the idea that a realistic defence to the bid would be to claim they care for their customers beats me. Neither company has much of a reputation for its ‘after care’ and this seems to be relatively common with trading companies which are accountancy toys for top management. Everyone knows that the quality of staff training and attitudes to customers reflects the philosophy of the management! 

Close second to a bargain will be Ward White’s acquisition of Halfords from the Burmah Group. In the property market, Woolworth’s sale of prime stores to the Heron Corporation and Rank’s portfolio sale to British Land both make bargains seem expensive, being good examples of how corporate management forgets common sense. The justification for both sales was identical; a single transaction to a known buyer for instant funds. Group valuations are carried out of the basis of a sale of the portfolio as a whole. 

In 1971, the Financial Times published my letter about property bonds, in which I suggested that the supply of suitably prime property is too limited to guarantee that the price paid reflects value and not demand, and that a re-sale in the open market would be at a price determined by the few, special purchasers who would fix their own value, not necessary coincident with the opinions of professional valuers. The value of a fund must inevitably be artificial, as the acid test is to try the open market, which makes one think that we are over-obsessed with the need for property and asset valuations. With a number of £30M+ investments hanging around in the market at the moment, dependence on book values must be questionable, but removing the value of assets as a measure of company performance would only shield the truth. It should not be too difficult for major property owners to buy in the expertise required to successfully break up an existing portfolio and it is a reflection of their existing advice that such expertise is clearly not easily recognisable.

Dec 1984 – In an increasingly complex economy, research is rapidly intruding upon the traditional province of the valuer: gut feeling. The mixing bowl, into which statistics, “informed” opinions, records of past transactions and trends are all technically blended, creates a science out of prediction. An objective appraisal from a source with influential but vested interests is a real test for objectivity.

Of Chartered Surveyors, Hugh Jenkins of the National Coal Board Pension Fund said, “ (they) will continue to be regarded with cynicism, as far as their professional capabilities are concerned, as long as they cling to gut feeling about growth prospects without being able to back them up with fundamental research.”

It is an integral feature of professionalism that the combination of knowledge and experience inevitably prejudices optimism, except in cases of absolute certainty. Research minimises risk so that while short-term deals may be lost, the long term brings substantial reward. As the private investor generally operates in the short term, the limitations imposed by research contradict investment philosophy. Will research avoid future problems? If you have to spend money, you are going to become increasingly frustrated if your adviser’s research tells you not to buy, when all about you, other funds are clearly active. This does not make the advice wrong, as waiting is a very patient game. 

Gut-feeling is an essential ingredient in the evaluation of research. When I suggested, in the first issue of QC, that the modern concept of professionalism removes initiative, several advisers on motivation and corporate strategy agreed with me. It is what makes sense at the time and you can only draw conclusions from information if you are able to adopt a broad view. It is not the result of research which provides a span of information, but the questions that gut-feelings invite you to ask.

The danger with published research, particularly when originating from a source actively participating in the market, is that the media picks upon the conclusions, which make news, without giving sufficient attention to the data. The effect is to institutionalise generalisations. Loose mention that secondary shop rents have grown at 9% per annum over the past 5 years, combined with the prediction that rents will rise 7% per annum above inflation up to May 1985 and 3% per annum in real terms thereafter is inviting inexperienced investors to assume that it is applicable to all secondary areas. The effect of predictions of this nature will be to force secondary yields even further lower and many retailers, in secondary positions, will be unable to reconcile actual profitability with expectations of their landlords. If major firms intend to use research for public relations, they must also recognise the harm they can do to the relationship between landlord and tenant.

Dec 1984 – Thank you for your kind comments about the first issue of ‘QC.’

Activity in the property year always seems to be squeezed into these last three months. A year starts with a lull as the effect of Christmas and New Year celebrations rub off and the cold weather sets it. Spring arrives, and it’s the start of the holiday season, together with racing and Ascot, tennis at Wimbledon and the generally relaxed feeling that with summer’s warmth, the annual slow-down is in swing. The final run up to Christmas, which used to start in September but has now -been put back·to October, is a course for the fit as everything has to be done at a cracking pace and decisions are no longer avoided. 

It’s one of the strange quirks peculiar to the humans that, in the need to plan ahead with such certainty (as if certainty could be guaranteed), we still tend to leave things to the last minute. Experts in motivation say that if we all worked every day as if we were off on holiday the next, we’d get through an incredible volume of work. On the other hand, we’d also probably run out of work to do every day. The Christmas ‘week’ so disturbs the flow of adrenalin that those who thrive under pressure crack up under the strain of not being able to work!

A Client has kindly supplied the following piece of bureaucratic thinking, which was given to him by a pensioner who asked him to explain it to her. Courtesy of the DHSS, winners of the 1984 Golden Bull Award:

“With reference to your letter about rates. In 1981 you were paid the supplementary rates. This meant that, as this was withdrawn, but not on most of the supplementary benefit cases, that on the rates for 1982/1983 year were reduced by the amount actually paid by us from the previous year. This has meant that the amount paid for your rates last year was not quite the total amount charged as this had been paid before. I hope this clarifies the situation.” 

Sep 1984 – News is coming through that the banks are tightening up on their lending to Asian buyers for grocery businesses. Asians tend to treat their  business interests as family  concerns,  injecting  sizeable capital funds from consortium or family sources, with bank loans over 5-10 years, in exchange for an income level which would seem derisory to most people for the amount of work involved.

The only reason that the formula works is because there are numerous unsatisfied buyers in the market place with continuing facilities and the entire business transfer market has probably been underpinned by immigrant buyers. Without this underlying demand, there would be little market for secondary shops and the post-war decline in secondary shopping positions would not have been (temporarily) halted.

If the banks start to examine the viability for grocery businesses, they will discover that the real profit comes not from trading income, but from re-sale of the business, once toil has been converted into turnover. The independent grocer has seen his share of the grocery market drop to below 10% of the total, with the balance  dominated  by the few major groups and the Co-operative movement,  operating  purpose-built  supermarkets  and  out-of-town superstores. These groups trade in clean, modern environments with an extensive stock range,  proper parking  facilities  and attract the real  spending  power. 

There  will  always  be  scope  for  the independent  retailer,  providing  a  specialist  service  with,  for example,  longer opening  hours or for pure convenience shopping, but  unless  the  trader’s buying  power  carries  sufficient  clout  to maintain  competitive  prices,  turnover  is  likely  to  be  relatively static, once local potential has been established and may not keep pace with inflation.

The problem is rubbing off into the investment market  where supermarkets let to substantial  ‘plc’  covenants  are fetching  fancy  prices  reflecting  review  expectations.  Whereas ‘household name plc’ will obviously trade profitably on an historic rent level,  any  increase  to current  market value  is  likely to hit below  the  line  as  economies  of  scale  react.  To  most  efficient retailers,  the level  of  rental  is  usually  a  nominal  percentage  of turnover  but  combined  with  the  annual  increase  in  the  other running  costs,  a  rent  increase,  albeit  to proper  levels,  can  kill viability. Under the  present system of financing, assignment to the ubiquitous  ‘Mr Patel’  will  be possible,  but if the survival of  the business  depends  totally  upon  anti-social  trading  hours  and  an uneconomic  business approach,  geared to capital profit only, then the major companies who are committed to long term leases may find that  their  continuing  liability,  under  the  rules  relating  to privity of  contract,  will rebound on their balance sheets. 

It is anomalous that  the grocery  trade operators are obliged  to take long leases so as  to  ensure  that  potential  assignees  will  be  able  to finance  the purchase, while  other  national  multiples,  such  as  Associated  British Foods, Boots and GUS can renew marginal premises in 5 year tranches only so assignment. It is re-think otherwise of their own rigid as  to  limit  their  liability  (editing required) in  the  event  of now  time  for  financial  institutions  to have  a they will create bankrupticies as a direct result lending policies

Sep 1984 – Many people know that I am a regular contributor to the correspondence columns, so circulating a commentary of this nature to Clients must look like an ego trip to a captive audience – it has crossed my mind that you may not read it! The objective is to keep in touch with Clients (past and present) and their legal advisers on a regular basis and to offer a commentary designed to stimulate and keep you informed of the latest developments.

As a potential forum in which to air one’s views, a “quarterly commentary” inevitably suffers from the disadvantage that ideas can be quickly out of date, so I shall not be imitating the style of others. Large agencies issue periodic reports on market trends, but most seem to concentrate upon the top end of the market and the recent “discovery” by Hillier Parker May & Rowden that secondary shop rents have increased at a rate of 9.2% per annum since 1979 simply enhances many people’ awareness that the larger agencies, and the property media, are addicted to prime. It is common knowledge that only relatively few advisers really understand secondary property, despite the fact that it constitutes at least 90% of the market.

A noticeable absence of commercial sense amongst many assistant surveyors, working for the larger partnerships, is startling and one wonders whether the modern concept of professionalism removes initiative. Few surveyors, whom I meet in the course of negotiations, display much individuality; most appearing to act as up-market messenger boxes, shielded from their own feelings and decisions by the supervising partner. This cannot possibly benefit the Client who, in instructing a  “name” is entitled to expect the service and attention which the reputation behind that “name” commands. Since I introduced the concept of specialisation into rent review valuations, there have been many imitators who unfortunately maintain the “money for old rope” image. Direct personal attention at partnership level on all aspects is the least that every Client deserves  – he rarely gets it and, strangely enough, seems prepared to accept it.