Retail Leases or Licences?

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When a landlord will accept a licence

The last thing a retail landlord wants to see is an empty shop, with no-one new to take on the rent. This is not just about the rental income stream that they will lose this is also about the overall image of a shopping centre. Surprisingly it doesn't take many shut shops to change the ambience within a shopping centre. If you think about it, how many shopping centres do you go into where there are many empty shopping units? It is true to say that the retail landlords pro-actively manage leases to ensure that there are as few vacant properties as possible.

So how does a retail landlord keep the shops fully open?

In an ideal world a landlord and a retailer would both want leases as this gives long term security to the landlord for his income and long term security for the retailer for their income from the footfall of passing customers (or to be exact not passing customers but customers). However, when retail conditions are not so good, or the products the retailer has aren't working that well in that particular location, or whatever other reason, figures simply don't add up and the retailer will be forced, often reluctantly, to shut up shop in that town. It can put the retail landlords in a difficult position, particularly in a shopping centre where he has the overall ambience to consider. He therefore may come to an agreement with the retailer to move from being in a lease with all the implications that has to a licence. In turn, he may reach a reduced rent or wipe off rent that's owed.

When is a Licence better than a Lease for a retailer?

For a retailer that is struggling, for whatever reason, that has been offered a licence rather the lease being taken back, or being taken to court for the money owed, etc, it can be a very good way of trading out of a bad situation. A licence rent will reflect better the current market trading position and also the retailer will have time to understand the market better and its trading potential. The realignment of rent and the agreement can work very well and of course isn't possible within the standard upward only rent reviews that leases have within them.

Finger on the pulse

The landlord does need to keep a finger on the pulse of how the market is working, or not working, with an eye on the future of the market also. We would add that they also need to remember that the retailers are in business just as they are and that everyone needs to be able to earn a living from the rents, be they leases or licences.

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If you truly do want an independent expert opinion from a surveyor, and many of us are also builders, with regard to leases, licences, landlord matters, rental issues, agreements , commercial surveys, building surveys, structural reports e ngineers reports / specific defects report, structural surveys, home buyers reports or any other property matters please contact 0800 298 5424 for a surveyor to give you a call back.

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We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

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