Hello and a warm welcome to Fisher German's Spring Edition of the Commercial Sector Newsletter.

In this edition we're focusing on a range of topics including: technology, legal issues and an update of the property market in the past year.

For the first time we're featuring articles from our Planning and Building Consultancy Sectors and there's also the customary 'Focus On' article which this time features Commercial Surveyor Simon Patrick from our Banbury office.

We hope you find the articles included both interesting and relevant and as always, if there's anything we can do to assist you with your Commercial Property matters, please give us a call.

All the best
Rob Haigh

This quarter we concentrate on investment sales and trends. Much has been made of the slowing of the investment market, but with London agents are still reporting that the market is overheating, many may be confused as to what yields look like for the various property types. Here we look at the core Fisher German geographic area and the last quarter of 2015 with a comparison to the same quarter in 2014.

Data produced from Co-Star Suite. Average Prices are based on weighted averages

This research generates some very interesting numbers, for instance there was a 22% fall in the sales volume allied to the Industrial and Distribution sector, but only a reduction of 33% in the actual number of transactions.

The office sector also saw some dramatic falls, a 78% fall in sales volume but only a 9% fall in the number of transactions.

The only sector that seems to have improved is the retail sector, which perhaps supports the comments that this market was slower to start to recover from the recession.

There may be other factors at work here too. Is the fall in the values and sales volume a result of more activity in the regions, (where values tend to be lower) and less focused on the south? Well, these figures are generated from the Fisher German heartland and exclude London and the south east.

What is clear is that there is yield pressure in all sectors with lower yields now than compared to 12 months ago.

For further information, please contact Kevin Benson email here or Rob Haigh email here. 

Click here to read more about our commercial property services

We often come across properties where tenants are in occupation without any form of written agreement in place. In this article we will be highlighting some of the issues that can arise from not having a written lease agreement.

Repairs

With no written agreement there is no clear indication of who is responsible for repairing the property. Whilst some of the time Landlord and Tenant can reach an agreement as to whom is responsible for the costs of repairs, we are often asked to advise on this issue, especially when relations between Landlord and Tenant have soured.

It is common for Landlord and Tenant to disagree on this matter as each seeks to protect their position, but had there been a written lease agreement in place this would clearly state where the obligation to repair lies. Whether this be a Full Repairing and Insuring (FRI) or Internal Repairing and Insuring only (IRI) obligation, one party would be disappointed but would most likely have been aware of their responsibilities with regards to repair prior to this situation ever arising.

Security of Tenure 

We often speak to property owners looking to redevelop a site where there is no written lease agreement in place. With no written agreement in place, if the tenant has been in occupation for a period longer than six months, they will benefit from a periodic tenancy and have Security of Tenure meaning vacant possession can only be obtained on limited grounds detailed in the Landlord and Tenant Act 1954.

The result of subsequently obtaining vacant possession can at worst be impossible and will always be costly. Even if the Landlord can satisfy the ground upon within vacant possession can be obtained, in certain circumstances compensation must be paid to the Tenant.

Use of Area 

It is common for us to find a tenant is using an area that is outside what the Landlord originally demised to them. The absence of a written lease agreement, which would make reference to a plan contained within the lease detailing the demised area can present the problem that there is no defined area.

This issue can damage the Landlord - Tenant relationship as it may be difficult for the Landlord to reclaim the additional areas of land with no proof of the original demised area to fall back on as an argument. If they cannot claim the land back and they wish to rentalise the additional area they may find the rent increases to a level that makes the property unviable for the Tenant. The alternative to this is that the Landlord chooses not to rentalise the additional area which will weaken the strength of the original deal that was agreed as they are in fact leasing more space but receiving no benefit in terms of rent.

Rights 

A written lease will dictate the rights granted to a tenant over the Landlords property. For example; rights to park vehicles, rights of access etc. will all be explicitly detailed. Both the Landlord and Tenant are potentially at risk if there is no written lease agreement in place as there will be no detailed agreement of these rights that the Tenant may or may not utilise. The Landlord or Tenant could lose control over the right they thought they benefited from which could have a negative impact on their position. 

Use

In a written lease agreement, the User clause will detail under which Use Classes the Tenant can operate within the property. These are usually restrictive and protect the Landlord from the Tenant operating outside their agreement use, for example; a tenant in a retail unit (A1 Use Class) would not be able to suddenly operate from the property as a Restaurant (A3 Use Class) without first applying to the local Council's Planning department for a change of use and seeking the Landlord's permission to do so. Another example could be a Tenant using an industrial unit for light industrial uses (B1 Use Class) would be unable to change their operation to a more 'general' industrial use (B2 Use Class) without obtaining permission from the local Council and the Landlord. Even if the local Council approve the change of use, the Landlord still has the right to prohibit the unit being utilised for any use outside that which is stated within the User clause of the lease.

Without a written lease agreement, the Landlord has limited control over enforcing the use class within which they want the Tenant to operate. This could lead to problems which include invalidation of the property insurance and disturbance to neighbouring tenants.

Conclusion

The above is only a brief overview of some of the common issues that can arise from not having a written lease agreement in place. It is by no means an exhaustive list and the potential pitfalls that can be created from not agreeing to a written lease agreement, not to mention the extra hassle it can cause for the Landlord and Tenant, mean that it's always advisable to have one in place.

For further information on this or any other Commercial Property matters, or if you're a Landlord or Tenant that does not have a written lease agreement in place, please contact Simon Patrick email here or Rob Haigh email here.

A resolution to grant planning permission, subject to a S106, has been achieved for a landmark mixed use development in Retford. The proposal comprises the development of up to 196 dwellings and 11 hectares of employment land including high values uses around a new roundabout. The site occupies land to the east and west of North Road, to the North of Retford, and lies in part adjacent to a new D and B scheme dealt with by the Retford Commercial team.

Background

The success comes after years of hard work promoting the site through the planning process. Working with the Local Planning Authority, the Fisher German Planning Team, supported by the Commercial Team, achieved a site allocation within the Council’s Site Allocations Development Plan Document and subsequently prepared and submitted an outline planning application for the mixed use development. In so doing, the team pushed the housing figures beyond those originally sought by the Council (optimising Councils lack of demonstrable 5 year housing supply) and incorporated a number of commercial uses within the scheme beyond the standard B uses originally envisaged by the Council. This truly was a team effort with the commercial surveyors working closely with the planning team using their in depth knowledge of the local and regional market to assist in overcoming potential opposition to such a varied and exciting scheme.

Scope of Scheme 

As well as housing, the scheme includes scope for a car showroom, a 100 bed hotel, family pub, some retail along with office and industrial uses to create a sustainable mixed use urban extension.

The residential element of the development along with the commercial uses around the proposed roundabout on North Road will enable significant investment to be undertaken to install the roads and service networks bring forward the employment land.

The Council is very much in support of the development considering it key to the Council's ambition to attract investment, increase employment opportunities and enable additional housing. The Local Enterprise Partnership, D2N2, has recently incorporated the site in the marketing material it is taking to MIPIM.

The site is currently being marketed by the Fisher German Development Team to find a joint venture development partner to bring the scheme forward in a phased manner.

Award winning team 

The Fisher German Planning Team works on a wide variety of projects including small and large scale commercial, residential and mixed use sites. The Team has grown to 12 town planners working across the Fisher German office network and has been awarded East Midlands RTPI Planning Consultancy of the year at the recent 2015 East Midlands Planning Awards.

For further information on this project or anything to do with Planning, please contact Liberty Stones email here or Kay Davies email here.

As demand inevitably increases for access to high quality mobile phone data coupled with the ever-growing requirement to have a superfast connection in the palm of your hand, the pressure on mobile phone operators to improve coverage and reduce mobile phone blackspots is a never ending challenge.

Undertaking day to day tasks on your handheld device has now become the norm which has put pressure on operators not only to give faster data to the public but also to upgrade existing cell sites to accommodate new equipment and build new sites to infill and strengthen existing coverage.

The technology to provide faster data has significantly changed but it still relies on a network of telecommunication base station sites. The demand for large numbers of new base stations is only likely to increase in future years with the advent of 5G rolling ever closer and new technologies such as IOT (Internet of Things) and LTE (Long Term Evolution).

As a property / landowner with a mast located on your property, at some point you already have or will receive an application to upgrade equipment, assign the lease, or even to renew the existing Lease. Fisher German would strongly recommend that you seek specialist advice from a firm who acts purely for landlords and not for the operators. It is likely that very attractive terms can be negotiated, including the rent, updated lease terms, payment of premiums and a very healthy contribution towards your costs.

With operators looking to enhance their networks, increase their profit margins and reduce costs, operators have been looking at network consolidation as a means of achieving these objectives. This has led to various Radio Access Network Sharing Agreements and outright purchases as we have seen in recent days with the purchase of Everything Everywhere by BT. Also in recent years Telefonica & Vodafone have created a joint venture company called Cornerstone Telecommunications Infrastructure Limited (CTIL), whose aim is to merge the two networks of Vodafone & Telefonica into one combined network.

Opportunities for landowners 

These network consolidations and outright purchases present many landlords with great opportunities to re gear leases and Fisher German are increasingly finding many agreements where there is huge potential to improve the rent and other terms when the lease is renegotiated. Not only will we achieve you the highest possible rent, but we will ensure that the rent review clause will be on the best possible basis to ensure your rent grows!

Rents for dual operator Greenfield sites average between &5,500 and &6,000 per annum and typically more in the Southern Regions where rents approaching &8000 per annum can be achieved. Rooftop site rents tend to be around the &12,000 to &15,000 for the Midlands with rents within the M25 ranging from &16,000 per annum to &30,000 per annum in areas such as Kensington & Westminster.

Our specialist telecoms team have extensive knowledge and manage a database of over 5,000 comparable telecom sites. This means that we can often achieve highly competitive rents at rent reviews, lease renewals and new site negotiations.

For further information contact:

Aaron Terrington 01858 411 276 email him here

Christopher Hicks 01858 411 202 email him here


For general information about our telecom services, click here

Dilapidations is often a subject which only occupies the minds of Landlords and Tenants at the end of a lease and in many cases is often forgotten altogether by Tenants until sometime after the keys have been handed back.

Enlightened tenants’ may have remembered to consult the lease in the months before the term ends but these are usually the same tenants, who at the expiry of a previous lease, have suffered at the hands of a zealous building surveyor! Tenants knowledgeable in the contents of their own lease, in my experience, are few and far between and most are often unaware of the obligations placed upon them by their own signature, albeit 10 or 15 years ago. All this leads to a very confrontational and expensive end to a property transaction.

The question is, can it be avoided and does it benefit the Landlord as well as the Tenant to do so?

Most commercial leases of any length contain a clause which permits the landlord and /or his surveyor to request access to view the condition of the property within the term of the lease, not just exclusively at or near the end of the term. Most Landlords don’t tend to avail themselves of the full opportunity this provides and after all why would they the rent is rolling in, quarter days are happy events and all is good! The payment of rent tends to appear at the top of the tenant’s obligations in any lease and the clauses that follow it do not have perhaps the landlord’s attention to the same degree but can provide some nasty shocks for the landlord further down the road. Central to these is the repairing and insuring obligation.

Benefits of a Repair Schedule 

Landlords can see the value of their asset deteriorate when repairs and decoration obligations are left by the tenant. This can affect the rental incomes of adjacent buildings but in addition to this there are some opportunities for landlords in ensuring the tenants meet their obligations within the term. The most important of these may be the advantage that any repairs schedule issued by the Landlord in the term, provided there is more than 3 years remaining will not be troubled by The Landlord and Tenant Act 1927 s18(1). This statute limits the recovery of damages at the end of the lease to the landlord’s loss in reversionary value. This can mean that in practical terms the landlord does not recover sufficient funds from a tenant in default to cover the repairs to the building. This does not apply to schedules issued within the term thanks to a decision in Jervis v Harris 1995.This case made the important distinction that the cost of repairs carried out within the term were not recovered as damages but were a debt and so escaped the cap.

The landlord can also receive additional benefits from serving a repair schedule within the term. The improved condition of the building may have a positive impact on the rent during reviews. There is less risk of voids at the end of the term if the building is kept in good condition throughout and there is a greater chance of getting repairs carried out whilst the benefit of those repairs is being enjoyed by the Tenant. The process is also less confrontational because the cost of the works within a schedule issued on a tenant in occupation can be managed by the tenant, this is not the case once the keys have been handed back the landlord is in control of the repair works.

If a Landlord issues in interim schedule it is usual for the lease to contain a clause requiring the tenant to commence the works within a specified period. Failure to do so can provide an opportunity for the landlord to instruct his own contractors and recover costs as a debt. There is often a greater chance of recovery of costs if the Tenant is still present and trading in the premises. Substantial failure to attend to significant repairs to the building may allow the Landlord to seek Forfeiture and this may be preferable where the Tenant is not performing his or her obligations and the market would allow for either improved rental income or an alternative development opportunity. 

Early warning

The real advantage however, in my opinion, is making the Tenant aware of their obligations at an early stage so that the repair obligations can be engaged and met in a way that allows the tenant to control their impact on the business financially. In the long run this can only assist the tenant! The tenant maintains control of cost and over the contractors engaged to carry out any work. It is always more cost effective for tenants to carry out the work themselves given the additional costs that a Landlord would be able to legitimately claim are likely to be avoided. It is often a requirement of any break clause that the repairing obligation is met and this is also assisted by early awareness of the repairing obligation. Breaks can often be frustrated by non-compliance with the repairing clauses. Keeping up with the repairs also crucially reduces the risk of receiving an eye watering demand from a landlord at the same time as the additional cost of moving premises at the end of the lease. Receiving an interim schedule allows the tenant to understand the Landlords practical expectations on repairs whilst there is an opportunity to discuss and negotiate. It allows the common misconceptions that tenants have over the repair liability to be tested whilst still having the opportunity and importantly the time to plan and react.

Prevention is better than cure

The concentration on sorting dilapidations at the end of the term is by far the norm and cannot produce the best outcome for property owners and tenants in the majority of cases. Prevention is better than cure and with that in mind is there not an argument that we should be considering auditing the repair obligations in the middle of commercial tenancies and using the interim repair schedule as a means of providing advantages for both the landlord and tenant. It is by no means a panacea to tenants who won’t ever understand or engage with their obligations but at least they cannot argue that they did not know what was expected. A history of engagement by a Landlord can only assist any future litigation to recover. Perhaps therefore we should not be afraid to break from the standard industry model and proactively use the clauses within commercial leases to drive the management of our client’s properties!

For further information on Dilapidations or anything related to Building Consultancy, please contact Paul Brown 01530 566577 or email him here

Click here to find out more about our commercial property services.

Introduce yourself…

I’m Simon Patrick, I work out of the Banbury, Bedford and Thame offices as a commercial Surveyor.

How long have you been with Fisher German?  

I started in May 2015, so still relatively new to Fisher German, but bring 15 years of experience with me.

What do you do, day to day? 

I am very much a general practice commercial Chartered Surveyor covering commercial agency, Landlord and Tenant, rent reviews, lease renewals, valuations and property management. This is coupled with providing initiatives to expand the department and spreading the word on the type of work.

What was it in particular that made you want to pursue a career as a Surveyor? 

It is the variety of challenges set by the clients we act for and the breadths of the work we undertake that initially and continue to drive my desire to be a Surveyor.

What do you enjoy most about your job? 

The variety the job provides means that no one day is the same, for example this week, on Monday I was looking at purchasing a shop in Banbury for a client, Tuesday I was in a meeting with solicitors regarding development options and then Wednesday preparing heads of terms for the sale of a property.

What's it like to work for Fisher German? 

Fisher German are a good company to work for, particularly as it's very focused and driven to grow and develop with great leadership and camaraderie across the firm.

What are you most excited about working on in the next 12 months? 

Everything and anything - I enjoy everything from the sale of a large commercial site to the lease renewal of an office in Milton Keynes. My enjoyment comes from the client contact and the people that are involved in the job.

Where do you see yourself progressing from here?

My focus is to continue the challenge of expanding the Fisher German commercial sector in the Banbury, Bedford and Thame area.