The pioneering new contract is being offered by the country’s biggest commercial property company, Land Securities, which last week opened the St David’s 2 shopping centre in Cardiff, creating over 4,000 jobs.
Under Clearlet, tenants will be offered:
- monthly rent payments without any premium charge (previously a 1% charge would be levied to account for the ‘time value of money’)
- a standard lease which complies with the industry’s Service Charge Code and Lease Code
- the ability to change the use or sublet the property if the landlord doesn’t respond within 15 days of a request under a ‘deemed consent’ clause
- rents aligned with the retail price index, rather than open market rent, at rent review
The British Property Federation (BPF) has welcomed the move and has backed plans to share the format with other landlords in a bid to simplify the leasing process and improve relationships with occupiers.
The dispute over monthly rent lease agreements came to the fore last year when Topshop boss Philip Green declared the quarterly payment system to be ‘archaic’ and ‘feudal’. Landlords argued that the terms were freely agreed to by retailers and were no different to the terms retailers used to pay their own suppliers.
Since then, the flexibility shown by major landlords to the slump in the occupier market has helped relations improve. Earlier in the year, the industry launched a ten point plan to make service charge payments more transparent.
It is hoped that Clearlet, which is being rolled out across the entire Land Securities retail portfolio, will encourage greater collaboration between landlords and tenants. The REIT is to take the lease to its development partners which include Hammerson, Henderson Global Investors and Capital Shopping Centres. Other landlords have expressed an interest in discussing a uniform approach.
To qualify for the new lease retailers will have to disclose turnover figures to help Land Securities manage the shopping centres to their maximum potential, to the benefit of the retailer environment and the property owner.
Clive Ashcroft, head of legal services at Land Securities, said:
“It’s evolution rather than revolution. It’s about being tenant friendly and that’s why we met with retailers to find out what they wanted, to ensure we could include any reasonable request.
“One of the big issues for them was the delay in responding to their requests to carry out renovations. We’ve now put in a ‘deemed consent’ clause meaning that if we don’t respond inside 15 working days, it counts as consent.
“Clearlet complies with the industry’s lease and service charge codes and we would call on the RICS and Law Society to take a more active role in supporting tenants by making their members comply too. Tenant friendly leasing is a reality that we need to strive towards across the industry. While we will still take on board deal specific points, we want Clearlet to become a standard across the industry and are willing to work closely with other developers and agents to make this a reality.”
Liz Peace, chief executive of the British Property Federation, said:
“This demonstrates the clear benefits to both landlords and tenants of working together and sorting through issues as adults. All too often we see firms running to the press to make their demands, when a direct conversation would be much more effective in resolving issues.
“The step-change our industry has made in recent years has come through close dialogue and a willingness to offer excellent levels of customer service. There has been much talk of greater transparency, better joint working and better value for the service charge and it is clear that some landlords have raised their games.
“This is a clear example of a major landlord working with its customers so that meeting the highest industry standards becomes the norm, rather than the exception.”
