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Monthly rent payments "could be industry standard"

14 January 2009

Commercial property landlords should consider requests for monthly rent payments, according to the law firm McGrigors.

The firm says that while requests for monthly rent payments have traditionally been seen as an act of desperation, landlords need to recognise that the traditional market has changed beyond recognition.

Major retailers, such as Sir Philip Green's Arcadia group, House of Fraser, Boots and Carphone Warehouse, are already negotiating for monthly rents. In the current economic climate, the firm says, landlords should view this as an indicator that monthly rents are set to become standard industry practice.

Lesley-Anne Faichnie, a senior solicitor in McGrigors’ real estate practice, said: “Monthly rental agreements can mean that tenants have a steadier flow of cash. Ultimately, this could be the difference between a tenant being able to continue paying their rent and having to forfeit the lease.

“We are convinced that monthly rent will soon be regular practice in the industry so we are urging landlords to accept this new reality quickly, before tenants go bust and they are faced with all the problems associated with having an insolvent occupier in their property."

She added that rental agreements could be restructured for short-term benefit and switched back to quarterly arrangements when both parties were comfortable.

However the firm warned that arrangements should not be made informally but should be legally documented, made with lenders' consent and in accordance with the landlords’ current banking agreements. "If the landlord does not obtain its lender's consent to any change, the landlord could find that it has broken its lending terms and the lender could be entitled to call up all of the landlord's current debts."

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