Pretty vacant

A real and growing problem '“ which is likely to get worse before it gets better '“ is the number of empty commercial units blighting high streets and shopping centres throughout the country. According to recent surveys, more than one in ten commercial units are currently vacant.

Is there anything landlords can do when faced with a cyclical downturn in the property market other than simply wait for the economy to pick up? Well, the government thinks so and the Department for Communities and Local Government has produced '“ in conjunction with a leading law firm '“ a form of lease known as a 'meanwhile lease'. The idea behind meanwhile leases is that they can be used by landlords to let vacant shops and units primarily to non-commercial tenants such as community groups for short-term lets.

To date these leases have been used primarily by local authorities with the government providing encouragement and assistance to those with particularly high vacancy rates such as Hastings and Peterborough borough councils. However, there is no reason why private landlords should not also make use of these leases, and indeed some have '“ HMV has reportedly used this form of lease for several of their empty ex-Zavvi stores.

The form of the lease differs from a standard commercial lease in several ways, including:

• no rent being payable under the lease;
• it is for a shorter period, typically six months or less; and
• it does not contain any repairing obligations.

The question remains as to whether this initiative will have any significant impact on the high street and to a large degree that depends on several factors, such as:

• whether landlords perceive that the benefits of using these leases are real; and
• crucially, if professionals such as solicitors or surveyors promote their existence and encourage clients to use them.

Benefits for landlords

There are several benefits for landlords, including more obvious ones such as informality and therefore speed and savings on legal fees '“ as these are standard documents which can be downloaded, free of charge '“ and less obvious benefits such as:

• savings on rates and other outgoings on empty units;
• additional security as there will be someone in occupation of the unit; and
• the prevention of the inevitable adverse knock-on effect on adjoining units on the high street and in shopping centres of having empty units.

When advising landlords and drafting a meanwhile lease, lawyers should ensure that the lease contracts out of the security of tenure provisions under the Landlord and Tenant Act 1954. Given that such leases are designed for short-term lettings, contracting out of the 1954 Act will ensure the tenant cannot apply for nor have the right to remain in the property on expiry of the term.

If a superior lease is in existence, the landlord should review the terms of the superior lease in order to determine whether he needs the superior landlord's consent to grant an underlease. The landlord should also ensure that the tenant's intended use of the property does not breach any planning regulations or a superior lease.

A helping hand

Professionals in the property sector should, at the very least, consider such leases and whether they should be recommended to clients. There is little or no excuse not to do so as the form of lease and a set of guidance notes is available, free of charge, from the Department for Communities and Local Government website.

There appears to have been little effective promotion, by the government or the property industry in general, of these documents and, while I am not aware of the exact number of such leases in existence, I strongly suspect they are relatively few in number.

While this initiative is by no means a panacea to the very real problem of vacant units, anything that has the potential to assist should not be discounted without being given serious consideration.

A cynic might suggest that one of the reasons such leases are not more prevalent is the fact that any professional fees for granting such leases are likely to be modest. However, this is a good opportunity to provide some positive assistance to cash-strapped landlord clients in the bad times which will hopefully be remembered by clients when the good times return. It is also a potential additional income stream for legal work that can be carried out at a relatively junior level.