Property: Assistance in the flight from landlord's charter: Commercial tenants are in a position to call the shots

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The Independent Online
SO MUCH has been made of the commercial property glut that one might think all companies still in business were gleefully anticipating paying less and less rent for their premises.

Of course, it does not really work like that. Falling property values only benefit those taking on space. Most of those already in accommodation, with no intention of moving, are locked into long-term leases with little opportunity of changing the terms or getting out.

Tenants often have more rights and freedom of manoeuvre than they think, however, according to Simon Bakewell, joint managing director of Nelson Bakewell, the chartered surveyors.

Mr Bakewell claims that a booklet recently produced by his firm in conjunction with the Institute of Directors, Occupying Commercial Property, a Tenants' Charter, has been well received by large and small companies. Attacked in certain quarters for encouraging tenants to take advantage of hard- pressed property owners, Mr Bakewell is adamant that the book and its message are not 'just a question of screwing the landlord'.

Given that the rules of the game appear to favour property owners, this might not be seen to be such a bad thing. In the introduction to the book, Peter Morgan, director-general of the Institute of Directors, says the terms of most leases 'suit investors in property - who are guaranteed a steady, rising return - but are not much help to recession-struck small businesses.'

He says UK companies are suffering a 'significant commercial disadvantage' to foreign competitors as a result of relatively expensive and inflexible property commitments. They also tend to pay more for utilities than counterparts in continental Europe.

Consequently, it is essential for UK companies to secure the best possible terms from landlords. To do that, property must cease to be a peripheral activity and become central to the company's main business plan, says Mr Bakewell. 'The landlord is not always well served by high service charges, etc. If a lower service charge leads to more profit, the landlord might be able to get a higher rent the next time round. The more efficient everybody is, the better it is.'

Before they can become efficient, however, those involved must know what they are doing. And Nelson Bakewell's consultancy work is mainly concerned with educating the ignorant.

'We have been making a mistake as a profession in assuming that clients know what they want,' he says, pointing out that other professions do not just accept that clients know what they want. Instead, they ask questions. That is what Nelson Bakewell has started to do, with its audit, analysis and action approach to business.

As a result, the firm has been able to discover, for instance, that some companies have break clauses in the leases on their buildings that they did not realise they had. Even if a company does not want to exercise this, it can be valuable - the right can be sold back to the landlord. Alternatively, if a company is discovered to have an upwards-only rent review, it can threaten to leave the property unless the rent is reduced to the market level.

Although such cases show the balance of power shifting towards tenants, Mr Bakewell says, the true value of the exercise is in helping them to plan for the future and realise the opportunities. Landlords and developers are also being assisted to respond better to the market's needs.

The current UK property market is unique, he says in that it takes little notice of the wants or needs of prospective tenants. 'Shell and core' developments, where fitting-out the building is postponed until a tenant is found, are commonplace in the United States, but restricted in the UK to huge projects, such as the Broadgate complex in the City of London.

Mr Bakewell suggests a better-educated marketplace could change this, and - since most fitted-out buildings are altered to suit the eventual occupant's wishes - save vast amounts of money.

(Photograph omitted)

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