No more Song and Dance – Size Matters!  (lengths of leases)

Local media coverage in Reigate & Redhill is currently focussed on the Harlequin Theatre. In 1986 as part of the North East Quadrant development a “multi purpose civic hall was built and the Borough Council took a 125 year lease back from the developers on behalf of the community at a nil rent so that they could build this centre for the community which it served. Not only is this used for singing dancing acting but also for business exhibitions, conferences and meeting rooms.

The Harlequin runs at a loss ( as do practically all such venues) and the Council wants to include this in the site for redevelopment as part of the Redhill Action Plan. This means that the remaining 100 years on the lease is to be surrendered in favour of, amongst other things, multiplex cinemas and a bowling alley.

We include this to draw your attention to the significance of the lease length as part of the lease contract.

No business should take a long lease of a building unless they are 100% certain that they can fulfil all that is required, the use, the repairs, pay the rates, the rent and any services charges throughout the length of the lease.

Even where the lease is sold or assigned to another, if you go broke and cannot pay the rent then the landlord can come to you to pay the rent instead even though you no longer occupy the premises.

Business leases are getting shorter as understandably businesses cannot commit or predict a future need more than a few years. They can get round a potential problem by being able to “break” from the contract but they must be able to do this without any harsh penalties or requirements.

We as valuation surveyors are able to negotiate the terms including the length of business leases  and to consider the effect of these terms when it comes to any rent reviews.

For more information log onto   www.rdn.co.uk/lease  

The Harlequin raises valuation issues about giving up 100 years remaining in a prime town centre site to enable development to take place but this letter focuses on the important aspect of the use covenant over such a long period.

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This is part of a regular series of topical articles provided exclusively by RDN Surveyors. If you would like any further information or add your own comments please reply to this e mail or contact Roger Nelson on 0800 902 0466. To see past newsletters log onto www.rdn.co.uk/newsroom