Commercial Leases Research Articles

The bane of reforming the socialist economic system

Property company shares have more than doubled in London during the past 18 months, up to February 1994. Institutional investors and foreign buyers are rushing to add property investments to their portfolios. However, a closer look at these developments suggests an absence of tangible indicators of a real recovery in the UK property market. (annex on the UK institutional commercial property lease).

Dilapidations claims at lease end: Sunlife Europe Properties Limited and Tiger Aspect Holdings Limited and Tiger Television Limited [2013] EWHC 463 (TCC)

In the context of dilapidations, The Honourable Mr Justice Edwards-Stuart provides a clear and logical resume of how he dealt with the claim for damages at the end of a commercial lease in respect of this case. Dilapidations claims at lease end are dealt with by way of damages. Damages in the context of dilapidations are the method by which one party, usually the landlord, is compensated, for the failings of the tenant. Failings typically occur in several ways, including among others, a failure to leave the property in repair, a failure to decorate, a failure to comply with certain legal requirements, or a failure to remove any works of alteration the tenant has themselves undertaken. Typically, a claim for damages will involve multiple claims. In addition to this, the landlord may have suffered further losses, such as his costs to employ surveyors, solicitors or other specialists, loss of income in the form of rent or insurance, or other costs associated with the property being empty as a result of the tenant's failure to return the property as it should have been. In addition, if the landlord is unable to recover any VAT associated with the above costs, VAT may also be recoverable from the tenant.

Urban density, law and the duration of real estate leases

This study explores the relationship between a country’s legal system and how its cities develop by examining the considerable variations in commercial real estate lease duration (or term) across both countries and cities. We find that the cross-country variation in lease duration and building construction is related to the content (common versus civil law) and efficiency (integrity and enforceability) of the legal system in the respective countries. First, we find that countries with a common law system and lower levels of corruption tend to have longer leases. Second, we find that in the United States, high-rise Class A office buildings tend to have tenants with longer term leases, suggesting that the advantages associated with being able to write and enforce a long term lease is particularly important for the development of high-rise office buildings. Finally, we find that there are in fact more high-rise office buildings in countries with more efficient legal systems.

The challenge of self‐regulation in commercial property leasing: a study of lease codes in the UK

PurposeUK Government policy to address perceived market failure in commercial property leasing has largely been pursued through industry self‐regulation. Yet, it is proving difficult to assess whether self‐regulation on leasing has been a “success”, or even to determine how to evaluate this. The purpose of this paper is to provide a framework for this and a clearer understanding of self‐regulation in commercial leasing.Design/methodology/approachA literature review suggests key criteria to explain the (in)effectiveness of self‐regulation. UK lease codes are analysed in the light of this literature, drawing on previous research carried out by the authors on the operation of these codes.FindingsLease codes appear to be failing as an effective system of self‐regulation. While there are influential market actors championing them, the fragmentation of the leasing process lessens this influence. The structures are not there to ensure implementation, monitor compliance and record views of affected stakeholders.Research limitations/implicationsThis work adds to the literature on self‐regulation in general, and provides an insight into its operation in a previously unexplored industry. Research is needed into the experience of other countries in regulating the property industry by voluntary means.Social implicationsThere are institutional limitations to self‐regulation within the property industry. This has implications for policy makers in considering the advantages and limitation of using a voluntary solution to achieve policy aims within the commercial leasing market.Originality/valueThis paper provides a first step in considering the lease codes in the wider context of industry self‐regulation and is relevant to policy makers and industry bodies.

Improving environmental performance through innovative commercial leasing

PurposeThe purpose of this paper is to illustrate, by reference to practical examples, how leases of commercial buildings can be more responsive to environmental issues.Design/methodology/approachThe paper explains how difficult it is within the structure and content of conventional leases to reduce the environmental impact of the tenanted commercial built environment. It explores the interplay between the content and structure of commercial leases and the behaviour of building owners, managers, tenants and occupants, illustrated through the experiences of a large Australian‐based commercial office building owner/operator.FindingsWith reference to practical examples it shows how conventional leases stifle innovation and illustrates the difficulties in drafting leases that enable a responsive approach to building management to be adopted. It shows how more fundamental changes that align and reward owners and tenants for working together for mutual benefit are required.Practical implicationsThe paper presents a number of “model clauses” for encouraging best environmental practices and concludes with a suite of recommendations.Originality/valueAlthough there have been conversations about green leases in recent years, there is little detailed evidence of their use in the marketplace. This paper remedies that deficiency by taking a case study approach that: illustrates the opportunities and difficulties in negotiating green leases; and shows how attempts to provide innovative building management can be hindered or supported by lease terms.

On the Choice between a Sale-Leaseback and Debt

This article introduces decision models for commercial real estate leasing. The concepts and models developed in the article can also be applied to equipment leasing and other types of leasing.

Issues that commonly have an impact upon corporate occupiers and how they can be avoided with appropriate foresight and planning

A corporate occupier party to a commercial lease on standard terms can reasonably expect to encounter a wide variety of issues during the life of its tenancy. At the heads of term and lease negotiation stages, matters including protection under the Landlord and Tenant Act 1954 (the Act) and rent review clauses will be considered, together with the relevant implications. As the tenancy progresses, common landlord-tenant exchanges may involve processes such as the application of service charge mechanisms, conduct of rent reviews and applications for landlord consents to alter, assign or sub-let to enable an occupier to deal with a property more freely. Towards the end of a lease, issues concerning business tenancies may once again arise, as parties consider how Act rights should be best utilised or defended. Also of importance may be the exercise of break clauses, an area of practice that commonly creates major disputes. Finally, not all disputes require a landlord and tenant relationship, for example third party neighbour matters such as disputes regarding rights to light and nuisance. This paper considers these issues from a practical, commercial and legal perspective.

Commercial Leasing

Commercial Leasing

What Happens When the Sky Does Fall In?

This article discusses the uncertainty in commercial lease situations where the roof requires complete replacement, and neither party is obliged to do so.

The Limits of Contractual Freedom in English Commercial Leases

This paper examiners the extent to which the principle of laisser-faire is dominant in the English law of commercial leases.

A Study on the Problems and the Reform Measures in Commercial Store Lease Protection Act

A Study on the Problems and the Reform Measures in Commercial Store Lease Protection Act

Urban Density, Law and the Duration of Real Estate Leases

This study explores the relationship between a country’s legal system and how its cities develop by examining the considerable variations in commercial real estate lease duration (or term) across both countries and cities. We find that the cross-country variation in lease duration and building construction is related to the content (common versus civil law) and efficiency (integrity and enforceability) of the legal system in the respective countries. First, we find that countries with a common law system and lower levels of corruption tend to have longer leases. Second, we find that in the United States, high-rise Class A office buildings tend to have tenants with longer term leases, suggesting that the advantages associated with being able to write and enforce a long term lease is particularly important for the development of high-rise office buildings. Finally, we find that there are in fact more high-rise office buildings in countries with more efficient legal systems.

Risk allocation issues in commercial leases

This paper discusses the issues and challenges when addressing casualty and insurance issues in a com-mercial lease. It tries to draw readers to use a ‘hub and spokes’ method in negotiating these clauses by tying them together into a cohesive negotiation. It also discusses the steps in developing a ‘no fault’ indemnification scheme for handling allocation of risks in insurance and avoiding subrogation claims following a casualty. In a related but slightly different topic than the more technical dis-cussion of casualty and insurance issues discussed beforehand, the author also updates readers on recent de-velopments in US federal legislation that provide a ‘backstop’ for insurers and underwriters to address the deep strain on these industries’ assets following a catastrophic event such as the Septem-ber 11th attacks.

The Impacts of Commercial Lease Structures on Landlord and Tenant Leasing Behaviours and Experiences

The commercial property market in New Zealand is characterized by two standard but distinct lease environments. In Auckland, the commercial core of the economy, net leases dominate, whereas in Wellington, the political capital, gross leases are dominant. These different lease environments have the potential to strongly influence the nature of landlord and tenant relationships in these markets. Using in-depth interviews with key industry personnel, this study examines the perceptions, behaviours, experiences and key issues confronting landlords and tenants under net and gross leases. The paper examines how different lease structures affect the behavioural and attitudinal characteristics of landlords and tenants including: landlord/tenant perceptions of a lease, the operation and maintenance procedures, landlord-tenant relationship, and ultimately, overall satisfaction.

Ethics, bankruptcy and greed: the unintended consequences for landlords of the 2005 bankruptcy amendments

The 2005 amendments to the United States Bankruptcy Code dramatically shifted the relative power of commercial landlords vis-?-vis their tenants. Landlords lobbied Congress for these amendments to capture the option value of unexpired commercial leases. The result has been a decrease in the number of successful retail reorganisations. Viewed purely from a profit making perspective, the landlords' actions are hard to criticise. However, ethical theories, such as Integrated Social Contracts Theory (ISCT) and Corporate Social Responsibility (CSR), envision a broader set of responsibilities in a business context, to which the landlords did not adhere in their quest for higher profits.

Carbon Reduction and Commercial Leases

Carbon Reduction and Commercial Leases

From an architect’s perspective: Acoustical challenges in mixed‐use buildings.

Incorporating acoustical design in mixed‐use buildings can be architecturally challenging. Key issues impacting acoustical design decisions are: (1) the unknown—due to undetermined uses of commercial lease space; (2) the cost—clients do not want to pay for ideal acoustical design because they perceive it to be cost prohibitive. Often clients do not understand the importance of considering acoustic elements during the initial design process until complaints occur much later, postconstruction. Other elements impacting acoustical design are: apartments versus condominiums, existing buildings versus new structures; changes in lease space use; and the possible conflict of the acoustical design not meeting life/safety code. On each architectural project it is ultimately the goal to design to client criteria with a mission to deliver solutions that meet the most needs based on user programs. Often concessions must be made to find the best overall solution for the building and budget. This impacts all of the design consultants, which means designs need to be flexible and are sometimes less than ideal in segregation. It is worth discussing how architects successfully design for the unknown and justify inclusion of acoustical designers early on, while staying within budget.

From lessees to partners: exploring tourism public–private partnerships within the New South Wales national parks and wildlife service

In a “new” protected-area management paradigm which requires close working relationships with a range of stakeholders, it is important that national parks managers recognise the individual interests of each group with whom they are expected to collaborate. A substantial body of research has investigated non-commercial collaborative activities among natural resource managers, tourism organisations and community groups. However, little academic attention has been paid to commercial tourism collaborations, particularly public–private partnerships (PPPs) with tourism operators. PPPs are often more contentious and require careful management to ensure sustainability and political acceptance. This paper reports on qualitative research, exploring the quality and nature of commercial lease arrangements between the New South Wales National Parks and Wildlife Service (NPWS) and a number of their private on-site tourism providers. In-depth interviews were conducted with fourteen key stakeholders involved in these partnerships. Based on an emergent approach to analysis, five main themes emerged which define the nature and quality of relationships between NPWS and tourism operators. Ultimately, it is argued that in commercial PPPs, protected-area managers need to move beyond viewing tourism operators as mere “lessees”, seeing them instead as valued and long-lasting “partners”.

Note on Real Estate Leases and Leasing

This note explains various types of leases and common lease terminology. Excerpt UVA-G-0330 NOTE ON REAL ESTATE LEASES AND LEASING Basic Definition A lease is a contract that transfers the right to possess and use a specified property from the owner of the property (the lessor) to the tenant (the lessee). It details the individual rights and obligations of each of these parties, granting the lessee the right to occupy the premises and use them for purposes stated in the lease for a specified period of time. In return, the lessor (landlord) retains the right to receive payment for the use of the premises as well as the right to retake possession of the property after the lease term has expired. This repossession prerogative is known as the reversionary right. The tenant's interest in the property stipulated in the lease is called the leasehold estate, or sometimes just the leasehold, and is usually considered personal property of the tenant for the duration of the lease. There are four types of leasehold estates: 1. Estate for years: An interest that allows possession for a defined period of time. Most commercial leases are of this type. . . .

The greening of commercial leases

PurposeThis paper seeks to consider how policy changes may drive a change in leasing practices, in order to reduce environmental impact (particularly carbon dioxide emissions) from the commercial building stock.Design/methodology/approachIn many countries, including the UK, environmental policy (particularly on carbon dioxide emissions from energy use) is beginning to impact on the commercial property market. This paper explores barriers to improved performance, two models for greening leases (a light green and dark green approach) based on work by the authors from Cardiff University and the Australian government, as well as how tenanted buildings can be managed “more greenly”. It then explores how green leases may penetrate the market.FindingsThe conventional relationship between the landlord (as building owner) and tenant (as occupier) largely neglects environmental considerations. However, change may be rapid, disruptive and challenging.Originality/valueThe paper lays out some of the issues, solutions, and pathways for the commercial property industry.