Christmas Options For Landlords With Empty Retail Space

In the build up to Christmas empty retail premises become sought after by seasonal businesses, selling products ranging from Christmas decorations to calendars. For a landlord with an empty shop, this can be a welcome source of income and for the occupying retailer a convenient short term arrangement.

There is no reason why these arrangements cannot work, but a landlord needs to take into account a number of risks, and should draw up a written agreement dealing with the following issues:

Rent - on the basis that the occupying business is likely to be temporary, consider the need to get the rent paid up front, or, to get a deposit to avoid the need to chase payment.

Repair/Deposit - untold damage to a property can be caused in a couple of months. Consider whether a deposit is necessary and what repairing obligations the occupier will be responsible for.

Security of tenure - even a short term temporary arrangement can create a business tenancy protected by the Landlord and Tenant Act 1954 if it is created in the wrong way. A weekly rolling or periodic agreement is likely to be protected, giving the occupier various statutory rights, including the right to be given at least six months’ notice to vacate. That can be avoided by having a certain and fixed term agreement of less than six months’ duration.

Rates - empty premises business rates are no more, but you should record the fact that the occupier will be responsible for rates (and should notify the rating department of their occupation).

Insurance - be clear about who is to insure the contents.

Contents - consider what will happen if the tenant leaves unsold stock behind after vacating. You should include a provision enabling you to sell the contents and deduct the costs of sale.

Consideration should also be given as to whether any additional consents are required, such as the consent of a superior landlord or planning permission.  With a little preparation these arrangements can work well and be an early Christmas present to a cash strapped landlord.  However, what are the options when a party takes up occupation without consent of the landlord?

In the case of squatters, the police have limited powers to act and may be persuaded to do so. However, more often than not, unless an obvious crime has been committed the police will treat the occupation as a civil matter. In this case, Court Rules allow a landlord to issue a summary claim for possession in the County Court. The procedure is well established and quick (only two days notice needs to be given before the hearing, and the Courts are normally willing to make an order), although it can be expensive.

In the case of a tenant unlawfully subletting, a landlord can require the tenant to recover possession, or take action against the tenant for breach of covenant in some other way, such as forfeiting their lease. In both cases, remedies exist, although it is still likely to give a Christmas headache to a landlord.

Published 03/12/2009. The author of this article is Richard Bagwell