Mishcon partner leads way on leasehold compromise

The commercial property sector has cleared the first hurdle in the race towards maintaining its self-regulatory status after it reached a new 'spirit of compromise' on leasehold reform, it emerged last week.The joint working group on commercial leases, chaired by Mishcon de Reya managing partner Phillip Freedman, produced its interim report on the review of commercial leases as the first step in the government timetable aimed at having a voluntary code up and running by March next year.

The report focuses mainly on the thorny issue of upwards-only rent reviews, and follows months of wrangling between landlords and tenants which left regeneration minister Sally Keeble threatening to introduce legislation on the matter ([2001] Gazette, 13 September, 8).The report - supported by a host of representative bodies including the Law Society - recommends that rent reviews should generally be open to market rent, with landlords offering alternatives to upwards-only reviews where possible.'These [alternatives] might include up/down reviews to open market rent with a minimum of the initial rent, or some other basis such as annual indexation,' the report suggests.Mr Freedman said a 'spirit of compromise and consensus' developed after the parties realised that the government had run out of patience.

'The government made it clear to the bodies representing landlords and institutions that it was serious about legislating if the matter wasn't resolved,' he explained.

'The minister also made it clear that if tenants were holding out for unrealistic objectives, the government would go with the majority and ignore more extreme elements.'Ms Keeble welcomed the report, calling the compromise a 'real achievement' and a boost to the sector.

'Greater flexibility of commercial leases will mean greater choice, matching lease terms to business plans,' she said.

'I will let the industry have an early indication as to whether the proposals are acceptable to government.'Paula Rohan