A Landlord’s view on a new business – Taking on a Lease
Leases the business risk
The landlord is running a business. The business is renting out property, known as leasing at a profit of above the costs he incurs. The costs that the landlord incurs are those of finance and maintenance. He may be prepared to take some calculated risks, but generally landlords much prefer to deal with an established business that will pay the rent regularly and will carry out the repairing covenants and obligations set out within the lease.
Leases set and forget tenants
A landlord much prefers a “set and forget” tenant. This means the tenant is set up with a lease and they regularly pay the rent and carry out the repairing covenants and the decoration covenants and make written application to the landlord when they wish to alter the property (as set out within the lease) the reinstatement covenant and keep the property up to date with the statutory covenants. The next time the landlord wishes to hear from them is when the lease needs renewal. This for a landlord is a perfect tenant and is a rarity in the landlord's eyes.
Strength of the covenant
Strength of the covenant is a term often used by chartered surveyors/commercial surveyors and landlords to summarise the quality of the tenants. The strength of the covenant is a mixture of the quality of tenant, quality of lease, rent level in the property. Within the market as a whole this is what is meant by the strength of the covenant in the broadest sense and will also emphasise what the landlords are looking for.