Release Leases: Time to get short and snappy?
We are seeing an industry drive towards standardisation of retail leases to simplify and speed up the legal process, reduce costs and fill vacant space. This has been evidenced by reports in the property press that LandSecs, Westfield and PruPim are looking to launch a standardised retail “tenant-friendly” lease which will initially be piloted in large shopping centres. If this is successful, the aim will be to promote the lease as an industry standard.
Are we about to see a dramatic change in the way in which retail deals are conducted?
Advantages
From our experience there are various clauses of a lease that are negotiated in almost all transactions – these are points where the market would appear ready to move on (think rent cessers, group sharing, uninsured risks, break conditions). It is undeniably a tenant’s market at the moment and a friendlier, simpler lease that can be negotiated more quickly may save everyone money.
Disadvantages
This is not a new concept: Land Securities launched a “Clear Let” standard lease with a much more even risk profile several years ago which was hailed as a revolutionary development but has not to date led to wide scale changes in practice. The second point is that, whilst we would accept that leases can be very lengthy, there is a lot of drafting that must appear no matter how “friendly” we try to make the document. This is reflected in the fact that the proposed new style PruPim lease is reportedly still 60 pages long (the Clear Let is c30). Additionally, different tenants will see different aspects of the lease as crucial to their business. In reality, any transaction over a certain threshold will involve two sets of lawyers seeking to achieve a stronger position for their client.
