Reduce rent due to reduced footfall

C

car

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Was discussing this with a friend last week.

He has a shop in a shopping mall. Business is over 40% down on same period last year. Landlord looking for rent. Money not there, he's trying to negotiate rent but landlord looking for full amount.
Footfall in the mall is down a considerable amount (no exact figures, but guesstimate of 25-30%).
Does anyone have any experience in this? Are contracts for rent ever negotiable dependent on how many people pass through as, I understand it, there had been guarantees on the amount of people that would be coming through.
 
The lease agreement is the vital item here. Your friend should read it carefully but its highly unlikely that it will contain provisions regarding footfall because its something outside the landlords control.
If there is nothing written down about footfall guarantees, then your friend needs to start some hard bargaining with the landlord about whats affordable. Research is the key to this, find out what other tenants are paying in the centre and if they have agreed reductions.
 
The lease that your friend has will not make any provision for fall in footfall figures;however your landlord is not blind to the commercial realities of life in business in Ireland now and your friend's best option is to approach the landlord and lay it out straight to him.
If your friend is a good tenant then I would imagine the landlord would much prefer to hold on to him,even at a reduced rent.
 
I agree, the lease agreement is important. He should read it extremely carefully. Many modern commercial leases have a clause for "upward only rent reviews" and he may be caught on this.

I have never seen a commercial lease on which the rent is associated with the level of footfall in a retail area.
 
The short answer at the moment is that tenants are unable to meet their obligations at present. The last few weeks have had a major impact on the retail scene. Problem being that there are many landlords who are blinkered. (I was something like this only that I saw it is very very tough out there and had to change my attitude) Is there a tenants association in the centre, where all the tenants can meet and discuss these problems ?? Landlords' pressure has been reduced with the falling interest rate. If the landlord sees some of the tenants shut up shop it will place some pressure on him to work out a compromise. I do know that some of the regional centres are having it very tough. If you wish PM me to tell me of the location.
 
I am a retailer with 4 different leases. I have negotiated a 63% rent reduction in one premised on the back of threatening to volentorily liquidate. Sat down with another landlord and negotiated a 20% reduction (which is not enough). On the third I negotiated a surrender of the lease (i had to raise funds to compensate him). The fourth is in our of Irelands premier shopping centres and they are tougher cookies. However, they are more exposed than an independant landlord. All it will take is for a few retailers to liquidate and rents will come crashing down in the big centre.
Play hard ball. Give him a P&L and present to him exactly how it is. If you are losing money then you ownous on you as a director to your company not to trade wrecklessly. You can go into volantory liquidation to break the lease. Threaten this. Swallow any pride you might have.
I am opening a new shop in three weeks time because i negotiated a one year rent free and a 6% of net turnover deal in a prime high-street location. Of course, in a new company. I dont care about my other businesses and my existing landlords. I'll liquidate the whole lot of it if they dont play ball with me. Luckily I do not have an personal guarantees signed and i am not a sole trader.
 
"Luckily I do not have an personal guarantees signed and i am not a sole trader. "

The rest of what you have posted is fighting talk - but your last sentence neatly encapsulates how easy it is to be brave when you have no personal liability issues.

mf
 
Tallyman, I am unable to fathom as to how you managed to have leases without some kind of PGs. It is extremely very rare that leases are offered to local traders without a PG. Your creditors will not wash with just simply liquidating businesses so you are able to get off the hook. They will have you in court for wreckless trading etc. Yep sure there are deals being done for rent reductions but only under special and specific circumstances. I do not believe any landlords will just knock off large chunks of rent without any future clawback clause, And as for getting a one year rent free unit, unless you are taking such a small space or a unit no other business would possibly take maybe, but remember business is still ticking and the world in not coming to an end. Rents may drop in some centres but the important tenants are the anchor tenants who pay up the vast majority of rent anyway. Cannot see your logic in threatening to liquidate your business or else it just may be a crock of rubbish in the first case.
 
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