Flexibility is key
As work patterns become more flexible, there is a need for workplaces to become more dynamic. In recent years tenants have moved towards shorter-term leases containing options to either break the term, or extend it, as it provides them with office space without the long-term liability. This trend has accelerated in the uncertainty of the post-Brexit economy; the latest Citibase Business Confidence Index found that the percentage of SME’s wanting a contract of less than 3 years has risen from 59% to 69%. This is likely to continue following the election result.
How can this shift in consumer behaviour benefit landlords?
Shorter term contracts can help landlord’s in periods of uncertainty. Empty or underutilised office or warehouse space could be marketed as flexible office space on short-term lets. This could potentially add value to an underperforming asset. An example of this would be vacant office space near a transport hub. A licence to occupy part of this space for a few hours, or a day, might be attractive to a company as a pre or post meeting base.
What should you look out for in any prospective short term, flexible leases?
- Be certain whether you need a lease or a licence. There are significant legal differences and advice should be sought.
- Consider taking a substantial rent deposit that can provide you with security in the absence of a long lease. Also consider securing a guarantor, especially for any start-up tenants.
- Review the alterations provisions to prohibit any substantial changes to the space, with the exception of internal demountable partitioning. The space should be quickly and easily re-lettable to a wide range of different tenants.
- As these leases are short term, it would also be prudent to prohibit subletting and you should take advice on the terms of any assignment provisions.
At asb law LLP we have experience of acting for tenants and landlords in these short term leases and licences.
For more information and to see how we can assist you in adding value to any vacant property you may hold, please contact Chris Worthington, Partner.
Published: 6 Jul 2017