Landlords from the ultra-huge to the small family-property companies continually feel that they are doing you a favour having you as a tenant of a store.
This is not the case so much with offices but with retail stores on the High Street – and especially within shopping centres – it is a case of ‘David and Goliath’, despite the fact that the retail environment has changed over the last 100 plus years.
Landlords believe they have the right to have five-yearly, upward only rent reviews, based purely on their past letting experience. It bears no resemblance to how the retailer may be trading, what competition he is facing or how his margins may be affected.
It is irrelevant to the landlord how long the company or individual has been trading there, if for 30 years he has fully paid his rent on time or if he is a nice person in any way.
If a large American company comes into a shopping centre willing to overpay for their lease (seeing some of that cost as marketing as they have the margin – especially if they are the brand owner), then a precedent is set.
The lease often contains many restrictions disallowing a retailer to get out of it. If he is lucky enough to assign it to a new tenant, he has to stand surety for that tenant regardless of who it is until that lease itself has expired.
Then there is the issue of service charges as set by the landlord; I accept these are sometimes capped but usually not. Without spending an inordinate amount of time, how does one query or prove that the service charges levied, the calculation thereof – as well as the fact that they can easily be varied – are justified and accurate?
Break clauses are common within leases but then it’s usually two-way, and dilapidations and other restrictions in small print can easily occur. Or because of a small default over the years, the serving of a break turns out to be impossible.
This is the tip of the iceberg where landlords rights tower over tenants. But what is the most unfair is that the only legal way out of a lease where a landlord is not prepared to help in any way is for the tenant or company to go bankrupt or do a voluntary liquidation – or even worse a pre-pack.
This is hugely unfair to many external creditors, ruins a person’s reputation and is misused by many dishonest retailers who simply want to clear up their balance sheet but it remains the only way a tenant can legally of sorts hand back a lease and walk away.
Surely the percentage of sales route with an agreed realistic minimum is the way to go? Many department stores and airports/stations have worked this way for years and whilst it too has risks at least it’s fairer for all.
And this must be the way forward in the democracy in which we live. The landlord as well as the tenant can share in the upside and together feel and help during a downside.
With this scenario, independent and specialist retailers in our country will never return and this goes against the real essence of good retail land management. It used to position what was important to a retailer and the rest fell into place.
Today a retailer even in the best position is penalised by the upwards only mentality of landlords and hence they become a victim of their own potential success.
Stephen Spitz is the CEO of Case Luggage.
Recommended: Real Business’s recent interview with Stephen Spitz