OLIVER BONAS, LONDON W1
Project: Inspection & Advice on Retail Lease
Client: Oliver Bonas
Services provided: Building Surveying, Lease Advice
Contract value: Undisclosed
With the retail sector currently struggling retailers are continually having to review the profitability of their shop units up and down the country. Rent and rates make up a large part of the outgoings. If the retailer is unable to negotiate favourable terms with a Landlord at lease renewal or when a break date comes up, sometimes there is no choice but to shut up shop and move out – another empty premises on a High Street.
This was certainly the case for Oliver Bonas in Marylebone Lane, London W1. Faced with a significant rent increase they decided to exercise their right to trigger a break clause under the lease.
The break clause was conditional upon Oliver Bonas complying with all the covenants in their lease including reinstatement, repair and redecoration. Failure to comply would render the break clause invalid and leave them committed to the increased rent for another 5 years.
Oliver Bonas came to DCP for advice. When a conditional break clause is triggered time is very much of the essence. If the tenant leaves things to the last minute and cannot complete any dilapidation works before the break date the Landlord can almost name his price.
Our client’s preferred solution was to agree a financial settlement, however there was no guarantee the Landlord would be willing to agree to this. The Landlord had a record of being rather slow in communicating exposing our client to a great deal of risk.
In order to maintain our client’s negotiating position we undertook an inspection of the unit provided an assessment of the repair and reinstatement works we considered would be necessary to comply with the break clause. We then obtained tenders from building contractors and advised the Landlord that works would be completed before the break date unless a financial settlement could be reached.
This dynamic approach roused a speedy response from the landlord and were able to agree a financial settlement which was agreeable to all parties which was documented in a Settlement Agreement
Lesson learnt. Be in control of the negotiating process by obtaining an early assessment on repairing, redecoration and reinstatement liabilities.