EDITOR’S COMMENT This week’s leader is dedicated to the growing number of occupiers that are, quite frankly and quite bluntly, taking the piss.
For their benefit, I thought it might be useful here to remind them of the definition of a lease.
A lease is a contract outlining the terms under which one party agrees to rent a property owned by another party. The important word here is “contract”. A contract, just in case anyone is confused, is a legally binding promise by one party to fulfil an obligation to another.
A lease guarantees the lessee – the tenant – use of an asset and guarantees the lessor – the landlord – regular payments for a specified period in exchange for use of that building. A guarantee, according to the Cambridge Dictionary, is a promise that something will be done or will happen. That lease also provides that both the lessee and the lessor face consequences if they fail to uphold the terms of the lease.
Now, I have never professed to be the sharpest tool in the shed, but I am struggling to understand why it is seemingly OK for the lessee to face no consequence for not delivering on its promise while the lessor has to face really damaging consequences despite delivering on its promise.
The CVA process allows this legally binding promise to be ignored. A promise that will have been made in good faith, presumably, in the cases of the big occupiers such as New Look (as an example), with good advice and due diligence undertaken.
A promise that would not have been given under duress, but freely agreed upon. This abuse of the CVA system must stop and – here comes my plea to the landlord community – we have got to stop allowing that misuse.
I’ve said it many times around diversity and inclusion and sustainability, but times of just words has got to stop. The time for grumbling about CVAs “permanently ripping up leases” or being a “nail in the coffin of property contract sanctity” has passed. Now is the time, to repeat a phrase from this page last week, for hard action.
Landlords have got to stop threatening not to back a CVA when it comes from a big business that has had huge amounts of private equity pumped into it but has failed, over numerous years, to keep enough cash in the business for a “rainy day”. Landlords must stand together and follow through with hard action.
I know this is easier said than done with the threat of having to shoulder the blame for 11,000 job losses, and the government again taking away any of the rightful powers landlords should have to enforce payment. But with planning reforms that will allow much easier change of use, why not just take that space back?
Utilise the smart people in your business to think of other ways that space could be used, look to other forms of income. If it is OK to agree to massive rent cuts or even no rent at all from a retailer like New Look, why not agree a smaller rent with a tenant that might actually really want a space to call their own, be that another retailer, a flex workspace (see p40 and give Convene a call if this floats your boat), or something else.
Surely it’s worth compromising to avoid the short-term pain of losing yet another tenant to receivership. As government announces a blanket extension on moratorium on evictions, the time has definitely come for the landlord community to get together and decide the action it absolutely must take.
EG stands by you in this challenge, and we promise to do all we can to help you deliver on those actions.
To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
