| Archive for Downsizer For an ethical approach to consumption |
| twoscoops |
Retail Rent Reductions - How to Negotiate? UPDATEBased on current trading conditions I have forecast that my business will be making a monthly loss come May.I am locked into a lease here, £2k pcm + £647 business rates. I am due an upwards only rent review in October. My figures stack up, my landlord runs a business in town which is related to the construction industry. His representative is a local estate agent who has already laid staff off. If I closed the shop, which I would hate to do, he can persue me for costs and rent until another tenant is found. So let's say I was up front with him now, or perhaps at the end of Jan when I demonstrate just how bad it is. How should I approach it? |
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| vegplot |
Sole trader or limited company? | ||||
| twoscoops |
Business is limited, but the lease is in my name. |
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| Jonnyboy |
Be open and transparent, If you go bankrupt he'll get nothing, if you haven't been making a killing in the good times let him know that too.
If I was in the same situation I would sell it as showing that he is likely to get more money, albeit over a long period, than a bit more for a few months and this may push you towards closing in which case he'll be out a lot more if he ever tries to chase you for it. |
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| tahir |
It's really down to the landlord, at the moment he might take the view that he's happy to help, on the other hand he might say "I don't give a stuff, he knew what he signed up for, plus I've got a mortgage to pay"
This is why it's always wise to have the lease in the name of a limited company with no personal guarantees. |
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| twoscoops |
That's what I was thinking, but I'm also concerned that if he dismisses a reduction Twoscoops will go bankrupt, not the business, as I can take it anywhere but would I legally be able to run it as a bankrupt?
lots of issues here! |
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| twoscoops |
That appeared to be absolutely impossible when I was a start-up. Now I'm an up-start. |
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| Penny Outskirts |
Depends totally on the landlord. Ours here would not give a monkeys. We are supposed to have had an upwards only rent review in Feb this year, but we just said no to everything they suggested, as it was stupid, and offered them £250 a year extra, as a token gesture. They've never come back to us....
If you have a good relationship it may be worth negotiating in this climate. Do you know any other tenants they deal with you can talk to? The more information you can find out quietly about their view on such things, the better prepared you may be to discuss options. |
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| Penny Outskirts |
It is impossible, my name's on our lease, but that matters not a jot, as we have no assets 
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| marigold |
What do you want to achieve? More time to pay or a rent reduction? From the landlord's point of view I imagine he'd be more sympathetic to the former, but it depends on his own financial situation. What other steps are you taking to balance your books? Showing your landlord evidence of other plans to increase takings/reduce outgoings might help your case. | ||||
| twoscoops |
I'm trying to achieve a significant rent reduction. I have cut my wage bill to below £500 per month from £2k a year ago. I have plans to increase takings but they are not related to this premises. This isn't as serious as it might sound - I've got other plans for the business which don't involve the shop. I just don't want to be in a position where this shop is taking up my time and energy for zero return or a loss, while the landlord still gets the same whack. |
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| marigold |
Do you reduce your prices for customers who have lost their jobs or whose takings are down due to the recession? | ||||
| twoscoops |
I've reduced a lot of prices, including VATable items, and any new products I'm stocking I've reduced margin on. Continental cheeses, however, are going up. | ||||
| jema |
That's kind of missing the point, a retailer can hardly do that. But between a Landlord and a retailer in a time where the premises in unlikely to be in demand, then there should be scope for for a compromise that leaves both parties ahead. |
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| marigold |
Perhaps my question wasn't strictly fair, but from the landlord's POV he sold an agreement at a price and he will have made his own plans for the year based on the expectation of that income. So, I would have thought the landlord is going to take some persuading that he should lower the price because his customer is in difficulties (especially if he has rent protection insurance, in which case a bankrupt tenant may be preferable to a tenant paying reduced rent).
Twoscoops has had to lower his prices to keep customers coming in, his landlord will only lower his price if he can see no alternative or is convinced that it is for his long-term greater good to do so (e.g. if the property would be impossible to re-let if twoscoops went out of business). I asked the question really just wondering how twoscoops would respond if a customer tried to negotiate down the price of a cheese on the grounds that he's been made redundant and his salary had been halved - what would the customer have to say to convince twoscoops to reduce the price of cheese? It might be helpful in thinking of a strategy for approaching the landlord. On the other hand, it might not  .
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| chez |
You can't be a director of a limited company as an undischarged bankrupt, but you can trade as a sole trader or partnership. The normal time before you are discharged is a year and after that there are not, normally, any restrictions on being a company director again; although I think that both the year and the no-restrictions thing can be varied by the receiver if they think that you have been taking the mickey. |
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| twoscoops |
My strategy has always been one of selling quality. Yes it is expensive but I will happily point you in the direction of the nearest Tesco. That is still the case with cheese, and I don't accept offers, but I have introduced some other products with greatly reduced margins in the hope of selling them in greater quantities - organic local milk, cream, butter and some charcuterie.
This may go some way in demonstrating to the landlord that I am doing all I can. Of course, I agreed terms over a certain period, and had trading conditions continued such as they were in 2005 I wouldn't be writing this now. But trading conditions have changed drastically, and my rent is one huge overhead that hasn't and I need to address it. |
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| marigold |
Good luck! Have you got a back-up plan if you can't get the rent reduced? | ||||
| chez |
I don't think you're the only one - and it's a knock on, unfortunately. Here's hoping he's reasonable with you. | ||||
| Penny Outskirts |
Certainly not alone at all. I think the bailiffs are thinking of taking up residence in our shopping centre 
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| dpack |
i recon ask is worth a try
maybe find premises cheaper? |
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| jema |
probably not an easy option in that location. | ||||
| twoscoops |
Well the back-up plan is to continue trading, I have no debts and I always pay my bills on time, so I could carry on and sit it out. I would bail out long before it got to the bailiffs!
Relocating the business might be an option. There are a few shops emptying in the next couple of months and there are deals to be done on rents. That still leaves me with this place, so back to square one. One thing did occur to me last night, thinking about this thread and what poeple have said via PM. Because part of my plan for the business in 2009/2010 involves outside finance, which is just about in place, if it came to the worst I could possibly include the shop in the package and let the business as a whole take on the lease. There is a chance that I could come to an agreement with the landlord (who, should I default on my rent at any point would be my only creditor) where I transfer the lease from my name to that of the business, demonstrate that there is a funded plan for it but get a significant reduction in rent. I've never really wanted to expose this part of the business to any outside elements as I'm very close to it and it was my first start-up, but needs must. |
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| marigold |
Sounds like you are better placed than many to ride it out if that's what it comes to. | ||||
| cab |
Back in the recession of the '80s, that was quite common where I lived. You'd get discounts in a lot of places if you were unemployed. Better to get some business with a lower profit than not get it at all, sometimes. |
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| cab |
Apparently there are 35 empty shops in Cambridge now, which I can well believe. Twoscoops, does your landlord also rent out other retail properties? Are they currently suffering or are they already sitting empty? It might be the case that if they are, he'll prefer to continue getting some income from you, even if he can't hike the price. Thats assuming of course he isn't forced to put the rent up because his income from the other properties has dropped...
Sorry, this isn't really helpful, just thinking aloud really. Strikes me that, either way, you don't lose anything by knowing how well his other properties (if he has any) are doing. |
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| twoscoops |
As far as I know this is the only one. |
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| cab |
Which I guess leads to the next question, how well are the other retail properties around there occupied? Are there a lot of empty shops due to the downturn? If so, I could well imagine that a landlord might be more tempted to give you a bit of breathing space. Makes little business sense to me to turf someone out and have what merely another empty property, when you could at least maintain SOME income throughout the downturn. All depends on how the local trading conditions are (and if they're like here, they're shocking). |
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| twoscoops |
Well that is best-case scenario. One is closing this week and I anticipate more will follow. This also adds to the agument as it means there are fewer reasons for people to come into town shopping.
Are many closing in Cambridge? What is the ratio between independents and multiples? |
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| cab |
Quite a big city centre for the size of city it is, Cambridge. But even so, we're losing a lot of shops. We've always had quite a good ratio of little independent shops to big chains, but it seems to me that we're currently losing both. Lost Haga (which moved in to where Habitat was), the Pier, Zavvi, we're going to lose one of the M&S 'Simply Food' stores, lost the Professional Cookware Shop, and then some of the independents too, such as the tobacconist/gentlemans gadget shop opposite Johns, and some independents at the Grafton end of town. The local rag did a feature on this yesterday: http://www.cambridge-news.co.uk/cn_news_home/displayarticle.asp?id=381249 Some of the shops in the shiny new 'grand arcade' are sitting empty still. As yet, the character of Cambridge as a place to shop hasn't changed much, but it won't take much more to make a right mess of, say, the Grafton end of town. |
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| twoscoops |
That is terrible, considering how huge the demand for retail space was four years ago. I just had a brief chat with another retailer here - things are getting scary. | ||||
| dpack |
both york and huddersfield have many recently vacated shops
prices are down a lot lots of my mates in building trades are struggling to fill the week with no debt you are well placed to survive this have a honest informal chat with the landlord and try to find some way that will work for both |
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| twoscoops |
Re: Retail Rent Reductions - How to Negotiate? UPDATEAfter much toing and froing we have reached an agreement. A 30% reduction to be reviewed in November 2010. Not only that but I've told him that I want to split the rental payments and pay 15% in March and September and 35% in December and June, when there is more cash in the business. If he decides we should draw up another contract to cover it then I will push to have the lease transferred from my name to that of the business. I'm pretty chuffed with this, especially seeing as a number of people told me that there was not a chance he would drop the rent. Part of the negotiation was my demonstrating that the demand for retail property has plummeted - a local agent told him that people were queueing up to occupy shops, so I had to talk him through all of the empty premises in town and all of the retail businesses that were on the market and not selling. That brought him round a bit. now, one last overhead to work on is the business rates. Worth a shot do you think? |
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| jema |
Good result 
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| Nick |
Top result. And yeah, business rates. How are they calculated? If they're based, like some, on the rentable value of the property, well, they should come down, too.
35 shops in Cambridge empty? Is that ALL? Hereford is half the size, and we hit 55 about 3 months ago. We've a new Retail Park that is shiny and unoccupied. We do have more tattoo parlours opening tho, which is nice. |
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| Penny Outskirts |
Well done twoscoops, that's excellent news. Was it the actual owner you negotiated with directly? | ||||
| twoscoops |
Yes, directly with the landlord. I emailed him a good month before the quarterly rent was due and we hammmered it out from there. A neighbour, who's landlord lives miles away and is never interested in any kind of correspondance, just didn't pay the rent and that's what got his attention they have started to talk.
Rateable value and how it is calculated is something I really don't understand, but I might seek professional help. |
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| Penny Outskirts |
Rateable value is calculated by local councils every five years, and the next is due in 2010. The rate at which you pay is set nationally and is around 45% of rateable value per annum. Loads o money!! If your rates are more than about 45% of your rent (ex VAT) then it may be worth contacting the council and asking them to check it. |
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| tahir |
Well done, good to see a sensible landlord. Most rating surveyors do a no gain no charge service, they'll look at your rates bill and talk to the council on your behalf. |