Are property agents to blame for upward only rent reviews in the UK?
||Crosby, Neil; Cathy Hughes and Sandi Murdoch
||Are property agents to blame for upward only rent reviews in the UK?
||Book of Abstracts: 2005 European Real Estate Society conference in association with the International Real Estate Society
||Leases of commercial property in the UK that are for more than 5 years typically have rent review that is upward only (i.e. at review the rent will be the higher of the current rent or the open market rent). Whilst the rent review clause is freely negotiated, several tenant groups have argued that they have in practice no choice; the UK government has applied pressure on landlords to offer alternatives to the upward only rent review through a Code of Practice, although this appears to have had little effect and the government is currently considering whether to introduce legislation. In negotiating commercial leases, many landlords and tenants employ property agents to act on their behalf. The question arises whether the upward only rent review is a real issue for the parties and if so whether the agents are proving to be an obstacle rather than an aid to negotiation on this point. The agent is involved in the negotiation of a package comprising the major lease terms and it may be that their role in perpetuating this form of rent review is significant. The research uses a set of case studies of specific transactions to explore the role of the property agent in these negotiations and how it varies with factors such as property and client type. It considers whether the agent influences the outcome of negotiations on rent review type and whether factors such as their own expectations play a major role. Fostering Competition in Real Estate Services: Domestic Supervision or Global Standards? Éamonn D'Arcy, The University of Reading Real estate services in common with other professional business services are rapidly becoming more globalized reflecting the elimination of most technological, logistical and legal barriers to global trade in such services. A key feature of this process in real estate services has been a significant consolidation of the sector through a process of mergers and acquisitions resulting in the emergence of a small number of global delivery platforms. While the sector will inevitably remain fragmented given the intrinsic characteristics of real estate an important consequence of this process of consolidation has been a reduction in competition, in particular in the provision of high-value added commercial real estate services. Which this process of consolidation has in part been a product of client pressure, its outcome raises many questions about competition and regulation in the sector. Moreover, given the partial evolution of many global real estate service firms into full–blown specialist financial service providers the type of regulatory and competition issues raised in the context of financial service markets may also be relevant. This paper is a first attempt at identifying the key regulatory and competition issues which arise from this process of consolidation and globalisation in the sector. In particular it examines how existing legal and supervisory frameworks such as professional bodies have adjusted or not to the changed market circumstances. It questions the relevance of traditional regulatory frameworks in the sector and assesses how the competitive landscape of the sector may have changed through a consideration of issues such as information provision, product differentiation and barriers to entry. The paper concludes with an assessment of the merits and suitability of domestically based regulation as compared to a set of global supervisory standards.
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