What Concerns Receivers

Receivers typically have a number of concerns when dealing with empty space projects. These include:

  • Ensuring tenants vacate the premises on time once the tenancy agreement has expired  
  • Ensuring there are no unauthorised modifications to the property by the tenant
  • Ensuring tenants maintain presentation standards and requirements
  • Ensuring any valuation of the premises is not negatively impacted
  • Minimising public liability, injuries and accidents
  • Minimising property damage, in particular caused by misuse
  • Minimising defit costs, that is, the cost of taking out all fixtures and fittings within the premises and returning it to its original standard.
  • Minimising unnecessary maintenance to the property
  • Minimising disruption to other tenants
  • Retaining control of the premises by ensuring it is only used for approved purposes and for the approved period of time.

These concerns can be addressed in a number of ways. Again, by understanding them you can tailor your communications with receivers to make it clear that your proposed tenancy will not trigger any of the concerns.

We also set out below some means in which to address these concerns. If financially possible, it is also recommended that a security deposit be provided to the receiver in the form of a bank guarantee. Having this money to call on (if necessary), will allay many of the above concerns.

Ensuring tenants vacate the premises on time once the tenancy agreement has expired

The Licence Agreement developed by the Arts Law Centre and recommended in the Legal and Leasing section of this Booklet sets out clearly the process for ending a tenancy. For a tenant to remain in the premises once the Licence Agreement has expired would constitute trespass, and there are strict legal sanctions against trespass and the illegal use of property.

Ensuring there are no unauthorised modifications to the property by the tenant

The Licence Agreement also clearly sets out any permitted modifications to the premises.

Ensuring any valuation of the premises is not negatively impacted

This is less likely to be of concern to receivers than to other types of landlords. When premises are valued by a professional valuer (often on behalf of a mortgagee bank), the valuation given to the premises is often largely based on the rental income from its tenancy(s). As the rental income from empty space projects is typically minimal, receivers may be concerned that this will negatively affect the premises valuation.

It may seem counter-intuitive, but in this situation empty premises may be valued higher than occupied premises. For empty premises a rental income will be approximated from similar premises, however if there is a tenant in the premises paying low rent, then that may be assumed to be what the premises are worth.

The use of a Licence Agreement negates this concern, as its short-term nature makes it clear it is only an interim use of the premises. Further, in the event that there is a valuation coming up, the short notice period of the Licence Agreement makes it simple to ensure the premises are vacant if necessary.

Ensuring tenants maintain presentation standards and requirements

While the Licence Agreement restricts the tenant from doing anything which is “noxious, offensive, audibly or visually a nuisance or which interferes with the use of any neighbouring properties”, this concern is one which may be best addressed through choosing the right tenant for each premises, and justifying this choice to the landlord. References regarding the tenant may be of assistance in this.

Minimizing public liability, injuries and accidents

The Licence Agreement specifies that adequate insurance must be maintained to address this issue.

Minimise property damage, in particular caused by misuse

The Licence Agreement sets out the permitted use for the premises, however this is again a concern which may be best addressed through choosing the right tenant for each premises, and justifying this choice to the landlord.

Minimising unnecessary maintenance to the property

It is highly recommended that you provide a plan or schedule for the cleaning and maintenance exercises that will be undertaken on the premises over the course of the licence period.

Minimizing disruption to other tenants

As set out above, the Licence Agreement restricts the tenant from doing anything which is “noxious, offensive, audibly or visually a nuisance or which interferes with the use of any neighbouring properties”.

It may also assist to provide a plan and/or schedule of all potentially disruptive activities which will be taking place in the premises.

Retaining control of the premises

On of the benefits of using the recommended Licence Agreement is that it ensures the landlord at all times retains full control and ownership of the premises, within the specified limits.