What we do

The last two decades have seen significant change in leasing practice, from a position 20 years ago where nearly all leases were 20 or 25 years in length, to the situation now where the average lease lasts just 5.9 years, including breaks.

This trend is illustrated by the latest BPF/IPD annual lease review.

Together with other changes in the market, such as the greater use of break clauses and flexible leasing products, there is now a greater degree of flexibility within the commercial property market than has existed before.

However, the impact of the recession, particularly on retailers, has meant that some occupiers have long leases signed many years ago that are not as flexible as they would now wish. This can be a cause of discord between the occupiers and their landlords.

Occupiers, who have had to show greater understanding and flexibility to retain and win customers in the current economic climate, are increasingly expecting the same from their landlords.

Monthly rents are one of the major areas that retailers have been pushing for, as they would enable them to more evenly balance their cashflow.

While landlords may be able to accommodate these wishes in some circumstances, it is not always an easy process. The landlords themselves will have payment obligations to keep, which may be dependent on receiving rent on a quarterly basis. The rent level wouldl have been set taking account of the interest the landlord would earn on the rent received, so moving to monthly payments would result in a loss of interest. This would probably need to be reflected in a recalculated monthly rent.

An industry agreement to accept the payment of rent monthly instead of quarterly has been the subject of much attention since Summer 2008. Following a meeting of the Owners and Occupiers Property Forum (OOPF) in early September, the landlord and retailer community agreed a joint statement on monthly rents:

This statement follows a meeting yesterday concerning retail leases and requests from some occupiers for their leases to be changed from quarterly to monthly rates.

These are the conclusions of the Owners' and Occupiers' Property Forum meeting on 10 September:

- The Forum recognised that over the last year monthly payment terms had been agreed on new lettings and, in keeping with the 2007 Lease Code, monthly payment should be considered, if requested, on new leases and at renewal. 

- In return for monthly terms it was agreed that it was acceptable practice to require payment by electronic means. 

- Landlords were encouraged to be open to discussing possible revisions to existing lease terms to incorporate monthly payments, but the Forum recognised that these discussions would have to take account of the implications for both parties. 

- Landlords are encouraged to respond positively to requests for changes to payment terms that ease cash flow pressures for occupiers facing financial difficulty, who in turn are advised to open discussions with their landlords at the earliest opportunity.

This statement was considered acceptable by both landlord and occupier parties. Around the same time Sir Phillip Green and Lord Harris of Peckham (Chairman of Carpetright) held their own group on the subject with major retail landlords, notably Land Securities and PruPim. The outcomes of this group was a media statement from Sir Phillip stating that an agreement had been made for small retailers (those with < 3 stores) to have the right to revert to monthly terms.

Most recently, we have set up the Retail Occupiers and Landlords Forum (ROLF), a high level discussion group for retail occupiers and landlords to discuss issues such as monthly rents. The first meeting of this group was held in February 2010, at which areas for potential project work were agreed. We are now in dialogue with the British Retail Consortium on the specifics of how these are taken forward.