the Business Forum and
the Economic Partnership
in Brighton & Hove
Homepage    BCRP Intranet    Funding    Events    Knowledgebase    Links    About us     Contact us
Key projects
Crime
reduction
 


Inward
investment
information
 


Licensee
Forum
 

Workforce development 

Transport
 

Business &
climate
change

Property &
Development sites

Business
Improvement
Districts

Housing
 

Strategy
 

Consultation opportunities
 

Brighton & Hove Business Forum
8-11 Pavilion Buildings, Brighton, BN1 1EE
Tel: 01273 735442
Email: info@brighton
business.co.uk

© Brighton & Hove
Business Forum

News - 3 September 2004

Landlords squeal at ODPM proposals on “upward only” clause

The UK’s largest landlord – Land Securities – has condemned the ODPM’s survey of business opinion on the scrapping of the hated “upward only” rent review clause common in most commercial leases.

This is the clause that states that rents can only go up, never down regardless of trading conditions, economic downturn or degeneration of a trading area. CEO of Land Securities, Francis Salway suggested at a CBI sponsored seminar on the subject that tenants in new developments would be hard hit by the possibility of legislation to impose open-market rent reviews. His argument is based on the fact that developers will not be able to guarantee rental levels to lenders and consequently they will have to pay higher rates of interest, which will inflate the cost of new developments and initial asking rents.

Similarly the owners of shopping malls claim that their commitment to marketing and servicing will suffer if rental income declines when the economy enters a downturn and open-market rents would result in lower rack rents.

The argument of the large property investor is one end of the spectrum of commercial leases. At the other end we have the independent retailer – a species that could become endangered in the not too distant future – for whom an upward only rent review is often the difference between survival and failure. The problem with the current review system is that it relies upon previous reviews or lease renewals of other premises in the same street to provide evidence for the next rent review. But if the rent can never go down (“upward only”), the very best that a shopkeeper can expect, even in the direst of economic recessions, is for the rent to remain the same. In the depths of a recession it is not uncommon for shops to go out of business because “ rental evidence” is cited from a year previously when the economy was robust. If there isn’t anything to refute it, it sticks and more businesses are saddled with rents they can’t meet because of declining turnover. Eventually enough shops stand vacant for long enough for private landlords to panic and reduce their asking rent. Gradually new tenants are attracted in but, ironically those that survived the recession often by the skin of their teeth, now have to compete with other shopkeepers in the same street who are enjoying much reduced rents while theirs remained the same because of the “upward only” clause.

The risk in retail should be shared by landlord and tenant. This way long-term relationships are established and some measure of stability is conferred upon retail areas. This new round of consultation has been sparked by an almost total failure of the industry to introduce a voluntary scrapping of the clause. The Office of the Deputy Prime Minister has not yet decided whether to proceed with the proposals to end upward only rent reviews. It will be a test of his mettle to see if he will take on some of the most powerful property owners in the country.

For details of the ODPM consultation click on the link below or look in Consultation Opportunities on the right hand side of the Home Page.

www.odpm.gov.uk/stellent/groups/odpm_urbanpolicy/documents/page/odpm_urbpol_029081.hcsp


Read related items on:
Property
Retail, pubs, clubs and restaurants
Legislation
Land Securities


Browse our business Knowledgebase or search by keyword


Headlines

23 May 2018
Gingerman Restaurant Group to Open Restaurant at Hanningtons Estate Brighton
16 May 2018
Can you help us help rough sleepers? Search for a venue to provide shelter 15 May 2018
New Research Reveals Cost of Opening A Business in Brighton: £6,000 11 May 2018
Tech firm SaleCycle to open new office in Brighton, creating 30+ new jobs 4 May 2018
Get involved - National Numeracy Day This 16 May 1 May 2018
BUSINESS IMPROVEMENT DISTRICT INDUSTRY CELEBRATES 300 BIDS 1 May 2018
Barclays' High Growth & Entrepreneurs Awards 2018 launch to celebrate start-up leaders in the UK 30 April 2018
Barclays launches major drive to help SMEs tackle Cymbercrime 24 April 2018
An evening with Chris Fox, Lib Dem Peer 24 April 2018
"A triumph of innovation" 13 April 2018
Brighton city Centre Vacancy Rates continue to buck national trend 12 April 2018
The Ivy in the Lanes Set to open 2 May 2018 11 April 2018
Free Dr Bike Service Returns 20 March 2018
Brighton named most entrepreneurial city AND second best for student happiness according to Fresh Student Living 19 March 2018
A Meeting with Chris Fox, Lib Dem Peer - Why Business Matters 14 March 2018
Better Business for All Event with BEIS 7 March 2018
Brighton celebrates women in tech as Spring Forward festival returns for a fourth year 6 March 2018
Six months of success for BTN BikeShare 2 March 2018
Sustainability in Action masterclasses for Sussex businesses 2 March 2018
Doing Business in China comes to Brighton 1 March 2018
Brighton & Hove Chamber of Commerce presents: Protecting your brand- a guide for fast growth businesses 1 March 2018
Long haul passengers boost local economy and jobs, according to new Gatwick report on the 'Visitor Economy' 28 February 2018
Save time reporting crime 27 February 2018
Warren Morgan Resigns from Brighton & Hove City Council 23 February 2018
Brighton Technology Company, Paxton Ranks in Sunday Times 100 Best Companies to Work For 23 February 2018
Greater Brighton's Commercial Property Database 22 February 2018
SE-ASSIST - Launch of Loan Capital in Greater Brighton 19 February 2018
House Price update Q4 2017 19 February 2018
What would you do in a crisis? 19 February 2018
The investment journey for high growth entrepreneurs 9 February 2018
Make Change Count 2018 - helping rough sleepers in Brighton & Hove 8 February 2018
Brighton Technology Company Paxton Announces Recipients of New Scholarship Programmein Association with the University of Brighton 8 February 2018
Cyber London Accelerator Invites Summer 2018 Entries 8 February 2018
Innovate UK Launches Strand 2 Emerging and Enabling Technologies Sector Competition 8 February 2018
Success In Sussex As Food And Drink Heroes Crowned Winners 8 February 2018
UK Games Fund - Fourth Round Open to Applications 8 February 2018
Innovate UK & Prince's Trust Launch Young Innovators' Programme 6 February 2018
Brighton & Hove Food Partnership launches 'Kit Out The Kitchen' crowdfunding campaign 2 February 2018
Brighton & Hove Council and Crest Nicholson win £15m government funding to kickstart King Alfred project 1 February 2018
Could a Utilise Plus Programme grant help you?