Keywords: The Reluctant Landlord,
surplus property, liability mitigation
strategies, creative solutions
INTRODUCTION
The property market in the UK has been
typified by leases with a 25-year term
and five-yearly upward-only rent reviews,
with no breaks. This has provided an ideal
structure for the investment market, but it
has come to be a millstone around the
corporate occupier’s neck. The property
crash of the early 1990s was a catalyst for
temporary change, as supply greatly ex-
ceeded demand, but the boom of the late
1990s ushered in the return of longer
leases and higher rents as demand out-
stripped supply.
The turn of the twenty-first century has
seen the market come full circle, with
decreasing demand, large supply, shorter
lease lengths and falling rents. Occupiers
caught in the cycle when the market is
strong experience long-term problems.
They are pressurised into taking leases
with the double whammy of high rents
and long terms to satisfy operational needs
when business is booming, but are hard
hit when the space becomes surplus to
requirements.Thisisusually(asnow)
Howard Cooke is managing director of
FraserCRE, a real estate management and
consulting firm dedicated to the corporate
occupier market. He specialises in all aspects of
property management and real estate consult-
ing. He has undertaken projects for clients on a
range of issues from portfolio analysis and
restructuring through to corporate disposals and
acquisitions, as well as general surveying work
such as property acquisitions and disposals, rent
reviews and lease renewals. Prior to joining
FraserCRE as Operations Director in 1995,
Howard was at Asda Property Holdings, P & O
Properties and Hillier Parker. He is an external
tutor and examiner at The College of Estate
Management in Reading, Editor of the
‘Handbook of Property Management’ published
by Sweet & Maxwell, and a member of CoreNet
and the Institute of Management.
A
BSTRACT
As the property market falters, corporate
occupiers are increasingly finding themselves in
the uncomfortable role of ‘The Reluctant
Landlord’, with surplus property and sub-
tenants. When you are facing both sides of the
landlord–tenant equation, what strategies can
you use to limit the damage to cash flow and
to avoid the costly legal pitfalls awaiting you
if you get it wrong?
Mitigating corporate real estate liabilities
by managing both sides of the landlord
and tenant equation: The Reluctant
Landlord scenario
Howard Cooke
Received (in revised form): 3rd February, 2003
FraserCRE, 5–11 Theobalds Road, London WC1X 8SH, UK;
Tel: ϩ44 (0) 20 7312 1950; Fax: ϩ44 (0) 20 7404 7411; e-mail: hc@frasercre.com
Journal of Corporate Real Estate Volume 5 Number 2
Page 165
Journal of Corporate Real Estate
Vol. 5 No. 2, 2003, pp. 165–172.
᭧Henry Stewart Publications,
1463–001X