Morgan & Clarke received instruction from the Tenant of a high turnover event-led public house in South London to assist with the renewal of the lease.
The Tenant mentioned their concern that Stonegate would decide to oppose their renewal if they chose to rely on their rights under Landlord & Tenant Act 1954 in serving a Section 26 Notice. Morgan & Clarke studied the lease in detail and noticed the agreement afforded the Tenant an alternative route in the form of an ‘option to extend'. This option, if properly exercised, could not be opposed by the Landlord.
In line with our advice, our client instructed a solicitor to exercise their contractual option in securing a further term.
Morgan & Clarke received further instruction to negotiate with the landlord and agree on the rent payable for the new term.
With regard to the specific nature of the business, the high level of turnover was unlikely to be sustained without the continuation of very high levels of expenditure. These operational costs comprised lighting, technical and sound engineers, and above-average staff wages due to staff levels required to service the many bar areas, amongst other essential and specific costs.
1. Stonegate Original Tied Rent Assessment Proposal - £140,000
2. Negotiated Settlement - £110,000 with a cap (4%) and collar (2%) concerning RPI.
Stonegate proposed to increase the passing rent by approximately 28.5%, which would have amounted to considerable additional rent payments over a five-year period to the tune of six figures. Morgan & Clarke were able to negotiate a more realistic rent settlement, approximately 21.4% lower than the original proposal, amounting to savings in excess of £100,000 over the five-year period.
Morgan & Clarke used its market knowledge and expertise to secure competitive terms for our client in negotiation with Stonegate to secure a ‘cap and collar’ on the annual RPI linked reviews which were previously open-ended. This was essential in light of the inflationary pressures present at that moment in time.