Landlords and the Recession

08/01/2009 by info.

As an agent which party do I find most infuriating to deal with – is it the buyer or the seller?

Well the truth is that it depends on the individual as I am sure that you are aware in life there are great people to deal with in life and others who simply are a pain in the neck.

No - the category of person I find most infuriating to deal with is neither the buyer nor the seller but often the landlord.

If you want to buy or sell a business operating from leasehold premises you need to have the landlord’s agreement to assign the lease to a new party. However, landlords I find can often operate in a totally unreasonable manner.

Firstly greed rears it ugly head. We are in a recession or are we in a depression, and retail businesses especially are finding it very hard to survive yet landlords think that they should not take a cut in rents despite the reduction in the capital value of the property as “they only have upward revisions in rent” in their lease agreement.

Sales of businesses are collapsing because the landlord still expect these increases in rent – I am aware of a landlord who expected a 25% increase in the shops rent on assignment - during a recession! What is the result of this? Well the buyer withdrew and the business owner is now closing his business as the landlord has reduced the value of the business. I wonder whether that landlord, as a result of his greed, will now suffer a long void period?

Secondly, there is fear. A business may have been trading from premises for years easily being able to pay the rent, however when the landlord receives a request that the owner wishes him to assign the lease to another then the landlord often wants more security. They will ask for a years rent deposit for example, what is the result of this, the sale collapses as the buyer doesn’t have the funds or they will decide that they would not want this person as their landlord.

So if you are a landlord, perhaps you should be thinking more long term when making decisions in a recession, if you are stopping someone from selling their business you will be the one who will ultimately lose out in the end.

Is it not better to have a 4% return on capital rather than a 0% return?

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