Business Rents

Part of Petition – in the House of Commons at 10:42 pm on 10th November 1992.

Alert me about debates like this

Photo of Angela Browning Angela Browning , Tiverton 10:42 pm, 10th November 1992

I am grateful to my hon. Friend. I hope that he will forgive me if I press on with some speed, because I have other factors to mention.

Allied to the blatant negation of the market is the second problem—the dominance of the 20-to-25-year institutional lease, which is virtually unknown outside this country. These long leases mean that tenants are unable to escape unjustified rents. In addition, they also prevent small shops from moving from existing premises to new shopping centres or, in the case of offices, to business parks, when local market conditions dictate. As experience in high streets throughout the country, from large cities to small market towns, demonstrates, consumers are departing from traditional shopping areas, leaving those that they used to shop with trapped by hopelessly unprofitable long-term tenancies.

The third root of the present problems is the system that is in place to resolve disputes between landlords and their tenants. When a tenant disputes the rent at a review, he or she must appeal to a third party arbitrator against whose decision there is no appeal. To resolve that dispute, the arbitrator summons evidence of the rental levels agreed for "comparable" properties.

Comparable evidence includes both rent reviews and new lettings, but such a system effectively means that evidence or reviews must be based on the peak of the market. The recession means that there are few new lettings on which to draw. What few new lettings exist are obscured by a miasma of confidentiality clauses concealing the real market rent. There is therefore effectively no way for the true state of the market to influence an arbitrator's valuation.

Empty shops and offices—an excellent indication of what rental levels ought to be—are not admissible as evidence; nor are other factors, such as the level of unemployment, the rate of inflation, or the balance of supply and demand. Yet again, the market cannot work because a free flow of readily available information—the heartbeat of the market mechanism—is totally absent from the system. The cumulative effect of each of these problems is, sadly, all too often bankruptcy.

The story does not end there, however, for yet another part of our medieval system of retail rents is the horrendous concept of original tenant liability. This system, which the Scots have been clever enough to avoid and which is unique to England and Wales, means that, when a bankruptcy occurs because of a dramatically uplifted rent at review, tenants far back in the lease assignment chain, even if they occupied a property for only a few months decades earlier, can find themselves presented with a liability of nightmarish proportions.

One bankruptcy swiftly follows another, and produces a great deal of personal anguish. I have known of three such cases since I became Member for Tiverton in. April, one of which led to the couple concerned facing the prospect of having to sell the matrimonial home to discharge the debts of people whom they had never met. The effect that it had on their health was dramatic. They were under permanent medication from their doctor, and it damaged their lives tremendously.