According to a recent BBC article, 2023 is projected to have the highest number of companies going bankrupt since the financial crisis that occurred in 2009.
Based on research conducted by insolvency firm Begbies Traynor, it was found that the number of firms in critical financial distress increased by 25%, while insolvencies rose by 10% in the last three months leading up to September 2023 compared to the same period in the previous year.
The rising costs, higher inflation, and weaker consumer demand due to the cost of living crisis have resulted in significant consequences. Besides job losses, commercial landlords may have to deal with an empty property, which may lead to marketing and holding costs, as well as repairs and redecoration expenses. If the tenant does not comply with the lease covenants, the landlord will have to bear the costs of any remedial works, as there will be no tenant to pursue dilapidations. In some cases, a tenant may have neglected the property for decades, leading to the landlord having to spend thousands of pounds to make it habitable for a new tenant.
More and more landlords are taking steps to plan and prepare for these situations. Some landlords are issuing repair notices to tenants, while others are serving an interim schedule of dilapidations. During lease renewal negotiations, landlords insist on a schedule of works, which requires tenants to attend to certain repairs (such as fixing a defective roof, remedying any damp issues, or repairing rotten windows) within the first 12 months of the lease. This ensures that the external structure of the building is maintained, thus limiting the landlord's cost exposure in case a tenant fails to comply with the terms of the agreement.
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