Sushila Pindoria, senior associate at Bircham Dyson Bell LLP believes that quarterly rental payments by tenants, especially those in the retail sector, are fast becoming a thing of the past as more tenants demand to pay monthly.
"Tenants are struggling to manage their cash flow due to the downturn in their businesses especially retailers who are often living from 'hand to mouth' and are seeking a degree of flexibility from their landlords in rental payments," explains Sushila.
"We're seeing increased demand from both new and existing tenants to pay rent monthly. My advice is that when dealing with existing leases, landlords and tenants should agree any departure from the payment terms set out in the lease by way of a side letter, where the landlord agrees to waive his/her right to collect rental payments on a quarterly basis. This is not a variation of the lease which is a more drastic measure for the landlord as it permanently varies the lease terms.
"The British Retail Consortium has been actively campaigning for some time now for landlords to agree to monthly payments which aids tenant's cash flow and in many cases, with our landlord clients, we are seeing an acceptance of this flexibility.
"More now, than ever before, it is an opportunity for landlords to display a more sympathetic business approach and this will help in cementing relationships with tenants. This can only benefit landlords in the long term as a degree of trust will have been created between the two. For those landlords who wish to stand firm to the archaic concept of quarterly payments in these times, they run the risk of losing a tenant who cannot afford to pay such sums in advance and thereby forcing them to cease trading in many cases. This would obviously result in vacant premises for landlords who also bear the brunt of empty rates and no rental income.
"At present, I'd say there is still a 70:30% split of quarterly to monthly payments, but the pendulum is swinging and I believe that archaic quarterly payments will eventually become a thing of the past as tenants are feeling bolder than ever in their demand for monthly payments."
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