The Reality of the Art of Rent Negotiation

By | December 12, 2020

from Morgan & Clarke

The necessity for rent negotiation raises its head if the proposed rent is not accepted by the recipient party, namely the tenant. One big problem is that if you don’t engage with meaningful discussions then there is no negotiation, just lip service. That in itself is of little or no concern to the majority of the POB field staff for a number of reasons. Let’s take the basic position. The BRM or BDM is the face to face contact point with the tenant. The BRM should make regular visits to the pub and should know the business well. But it is the Chartered Surveyor valuer who signs off the rent Assessment Proposal (RAP), and with whom ultimate responsibility lies. Who do you negotiate with?

We had a case in point recently where the senior BRM concerned was keen to do a deal and in effect shook hands on a compromise rent with a solid reduction from the suggested rent level. That was quickly over ridden by the Chartered Surveyor valuer on the basis that the Senior BRM was “not qualified” to handle the technical stuff. The valuer then did talk through the RAP and the MRO ‘Full Response’ with the tenant but gave absolutely no ground and no opening of any compromise. So off to third party they went, time wasted and at further expense. Negotiation is only ever successful if there is some solid give and take by both parties. Over the years we have been directly involved in many formal Court appointed mediation referrals. The ones that succeed, and most usually do, are where there is solid give and take from both sides. Upholding the Corporate line come what may is not negotiation. In simple terms;

“I hear what you say but I am not going to take a blind bit of notice ‘cos my job depends on not giving an inch”

Now we reach the all contentious MRO position. Application to go free of tie served and back comes the MRO ‘Full Response’ with an eye wateringly high free of tie rent proposal. The ones that were served pre Covid-19 all remain unaltered unless either we or the tenant press for a sensible downwards revision. Most are not revised and but some attract a solid reduction. One recently was from £83,000 down to £63,500 which was a rarity, but still far too high. Almost all the MRO applications have no negotiation whatsoever in the 56 day period allowed for negotiation. The only reaching out to the tenant is to try and persuade them at all costs to stay supply tied with discount incentives “Oh but I can’t discuss the MRO rent as that is a technical issue”.Ya di ya di ya, and so it goes on.

But what of the use of external experts hired by the POBs to assist deliberations and represent their case. Well you may ask because they are almost always hired AFTER the application is made to seek the help of the Independent Assessment to resolve matters. Definitely no negotiation from there on in to the submissions to the Independent Assessor. Almost all the POB external experts put up the case that often magically supports their paymasters previous proposals. There are some notable exceptions who make a call significantly below the POB rent offer for MRO but they, being honourable men, are few and far between. Way of the world…

The so called 56 day negotiating period can be cut in half for the purpose of the appointment of an Independent Assessor (IA) and that appointment sought after only 28 days. If no hint of any meaningful negotiation, why wait around for the 56 days to expire? The appointment of an Independent Assessor absolves the POB Chartered Surveyor valuer of any blame for overcooking the MRO rent. Real decision making is now conveniently well out of his hands and any blame can fall squarely on the Independent Assessor for either a negligent or “rogue” determination. Convenient.

To emphasise our point set out below are a sample of some recent Independent Assessment determination outcomes. We have removed all points of identity and location to preserve strict confidentiality. The start point is the current supply tied rent, then the RAP, followed by the proposed MRO rent and the IA determination. Finally the percentage reduction from the MRO rent offer.

Post Pandemic MRO Rent Determinations

We live in the slim hope that meaningful negotiations can at some time return. But we have the backdrop of the tooth and nail fight to resist MRO at every possible turn. Holding of breath for change to happen is not recommended !

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.