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JULY 2011 - “BREAKING UP IS HARD TO DO”

Edward Dodson of property consultancy Dodson Jones advises occupiers to think far ahead about break clauses. 

Have you got a lease renewal or tenant break coming up soon? Not just in the next six months, but over the next two or three years? Occupiers can never start planning early enough - the earlier the better, to make the very best of these opportunities.

Property can seem like an arcane mystery to those outside the industry, but rather than struggle with the technical details, it’s wiser to take advice from a local property expert. Although there is of course a cost involved, professional advice will open up opportunities which will save costs in the long term. Not only will a professional understand the mechanics of leases, they will also be up to date with current market conditions, availability, rental levels, lease terms, etc. There may be an opportunity to relocate, expand, re-gear leases, lower rents and - probably most importantly - get rid of, or change, onerous lease clauses. This can mean better terms for your business’s future relocation or expansion.

In the current climate landlords are more than likely to have a sympathetic ear to tenant requests, and in the majority of cases will be keen to keep existing tenants, particularly those with a good rent payment record and strong business plans. One word of warning, you must understand your local market before serving a notice to break, as in a strong market using your break may be a mistake. The market in Cambridge is quite varied at the moment with pockets of very strong demand and rents, such as in the city centre around the railway station and a landlord may be less keen to negotiate in those locations.

Timing is very important, particularly on tenant breaks, which are nearly always time-limited. Make a diary note of important dates and take advice well before those dates. It’s no good starting discussions with your landlord only three months before a break date, as it will be too late by then to serve notice. Even three months before a trigger notice date, which will usually happen a minimum of six months before the break date itself, will still give you no time to negotiate properly, or prepare for a relocation.

Is your lease contracted outside the security of tenure provisions of the Landlord & Tenant Act? If it is, you have no automatic rights to renew and the landlord does not have to serve notice on you to terminate the lease. Therefore the closer you get to the expiry date, the weaker your negotiating position becomes. Again, success depends on being prepared and giving yourself plenty of time.

Dodson Jones is in the process of helping a variety of Cambridge companies such as CDT, Plastic Logic, C4 Carbides, Biochrom, and Taylor Vinters in negotiations with landlords. For advice on lease renewals or tenant breaks, contact Edward Dodson on 01223 358114

This article was featured in both the Business Weekly and the Cambridge Evening News property publications (31.05.11 and 07.06.11 respectively).