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Make upward only rent reviews illegal. Enable businesses to exit unaffordable leases.

Comment 11th June 2018

Clauses instigating upward only rent reviews inserted into property leases should be made illegal for new leases and unenforceable for existing leases. Also where a rent review results in an increase that the tenant believes in unaffordable, the tenant should be able to exit the lease.

Why does this matter?

In a free market a review of the rent applicable for property in that market should be able to go down as well as up. The property owner should take his share of the market risk associated with his property; at present the risk of a declining local market is disproportionately and entirely passed to the tenant to such an extent that only the nuclear option of bankruptcy or its equivalent will rid the tenant of the unsupportable  burden of an excessive rent. The fact that much commercial property is owned by institutional landlords who virtually without exception will not countenance a lease without such an upward only clause forces Austin Tenant Advisors Austin office space into signing such a lease or not setting up or expanding their businesses. If the UK is to be a place where new and growing businesses are encouraged then such structural impediments to business must be eliminated. The current nature of property leases is such that budding entrepreneurs and business people hesitate to put such a rope around their necks. There is always the risk of a business failing, particularly a new one, and whereas many individuals could shoulder the direct losses of a less than successful new venture, the fact that signing one of these leases (often backed by having to give personal guarantees) means personal bankruptcy if the business does not take off is a great impediment to taking the risk. New and expanding small and medium enterprises need "easy in and easy out" terms which are not generally available in the UK commercial property market dominated by institutional landlords. These landlords often have no compunction about bleeding a business to death with an excessive rent and will often leave a property empty (keeping a capital value on their balance sheet that reflects its theoretical rental income) than let it at a lower prevailing market rent. 


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