As landlords look to secure the value of their investments in the midst of the current economic uncertainty, we are seeing an increasing number of portfolio re-gears taking place.

The basic idea, from the landlord's perspective, is to create momentary certainty as to the value of its investment, by agreeing renewal terms with its tenants ahead of the anticipated renewal schedule; the earlier a landlord can agree future rent increases and lock its existing tenants into new leases, the better (or at least 'more certain') the value of its investment.

How can a landlord persuade its tenants to sign up to renewal terms ahead of schedule? By offering rent incentives and/or other temporary concessions which a tenant may find favourable, but making sure to create long enough lease terms so as to still provide sufficient certainty as to future income.

How can this be done without affecting rent-review comparables? Seemingly by using side-letters which incorporate non-disclosure terms, such that each tenant within a property will not (in theory) know what terms have been offered to the others.

The process doesn't need to be complicated, but professional advice needs to be taken on the incentives (if any) to be offered and the valuation process in general.

We have extensive experience of dealing with re-gearing work and can help either landlord or tenant navigate the potential pitfalls.

If this is of interest, please contact Graeme for a preliminary conversation.

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