As retailers demand more flexible terms, will landlords start questioning the principle of security of tenure?

It’s been a good property market for retailers over the past few years, and tenants have been able to demand more flexible terms with shorter leases, more break clauses, and leases related to turnover.

Such ‘easy in, easy out’ leases are far more relevant for today’s retail environment, but increasingly when I meet people on the property side of the fence they are unhappy because as they see it, retailers have it both ways.

That’s because most leases are still signed under the terms of the 1954 Landlord and Tenant Act, which gives retail tenants security of tenure when their lease comes to an end.

What landlords say is that if retailers can have the flexibility to quit every five years, why don’t we have the right to change our tenants at the end of a term too? In Scotland where the act doesn’t apply, one property owner told me last night that she had been more willing to do soft deals which get the property occupied because her organisation knew that it would be easy to get a better deal from another tenant when it the market comes back.

So I won’t be surprised if as the market comes back, property owners might start trying to negotiate deals on the basis of them being outside the Act. That is of course their right, and a preferable option to changing the law, but while in some circumstances it might work for both sides, for many retailers having security of tenure remains really important.

If you’re having to pay for the fit-out of a store yourself, it’s hard to justify spending serious money if you can’t be sure that you’re going to be occupying the store for a decent number of years. And so if landlords are serious about working with retailers to create genuinely distinctive retail environments, security of tenure will need to remain a key principle on which deals are based.

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