The news that Gordon Ramsay had lost his court case over his liability for unpaid rent is a salutary tale for many in the trade. It highlights that even successful operators – and large businesses – can come a cropper on property deals and reinforces the need for all lessees to take professional advice before signing them, writes ALMR Chief Executive Kate Nicholls.
Although political attention has been on tied tenancies, in this case it was a commercial lease with a private landlord. Proof that the landlord and tenant relationship is never easy and, in the casual dining sector where rents and overheads are far greater, striking the wrong deal can be the difference between business success and failure.
We are seeing increasing use being made of the ability to contract leases outside the protection of the Landlord and Tenant Act – meaning lessees have no security of tenure, no right of renewal or often rent review. The Ramsay case hinged on the use of personal guarantees, again an increasingly common standard lease term which allows a landlord to pursue an individual for unpaid rent.
Too often lessees sign these commitments or waive their rights without fully understanding the consequences. In the commercial world, when you couple it with quarterly upfront payments, UORR terms and the unregulated use of rental comparables, it is a recipe for disaster.
It is why the ALMR exists – to provide advice and guidance lessees and a strong and effective voice to ensure that the regulatory regime is the best and most effective it can be. It is also why we are campaigning for the Code of Practice on Business Leasing to be revised to address these points.
With property costs being the second biggest overhead and rents and rates the single biggest brake on success, join us in our campaign to ensure we get the free, fair and flexible property market we need to grow and invest.