In a competitive business environment, businesses and commercial entities must lay down strategic measures in order to survive on the market. Geltner (2007, p. 45) notes that this is inclusive of the core and non-core business practices. Facilities management falls within non-core areas of an organization which has an essential role in supporting the core business areas of an organization. Among the operations included in the facilities management are the issues surrounding tenancy and related matter. The Landlord and Tenant Act of 1954 provides a number of guidelines which can be used to help landlords and tenants in pursuing their facility management and ownership within a legal framework that benefits both of them. The issues related to tenancy have recently become complicated especially with the regulations surrounding leasing of a rented premise and the terms and conditions upon which a tenant can terminate the contract with a leaser without drawing in the landlord. To this end, property management in a commercial property development must be strategically defined just as the strategic role it plays in the overall functioning of the of a business entity. According to Randolph (2012, p. 4), leasing property includes a cohesive approach, “to operating, maintaining, improving, and adapting the buildings and infrastructure” of a commercial property with the aim of providing an enabling environment which supports the core business objectives. The British Institute of Facilities Management defines facilities management as, “The practice of coordinating the physical workplace with the people and work of a business entity”. The International Facility Management posits that facility management is simply the management of a vital asset—the business’ facilities”. The researcher in this paper describes the steps that Pies Ltd could take to ensure that it does not bear continued liability of a demised property beyond 23rd December 2013. The researcher also explores the steps that Pies Ltd could undertake in the event that it wants to obtain a new tenancy of the demised premises having taken on neighboring premises which together with the demised premises will accommodate its growing business. Finally, the researcher also explores the scenario between Pleas & Co and Pies Ltd in the event that a new lease is granted to Pies Ltd
The existing lease agreement between Please & Co and Pies Ltd is entrenched in laws contained in the Landlord and Tenant Act of 1954 part II. This law provides for all the necessary steps and procedures that a tenant and a landlord can follow in the period of tenancy and the end of tenancy. In particular, the law provides that for two entities to have a tenancy relationship four conditions must be fulfilled. First, there must be a tenancy where the landlord has agreed to give his facility to a tenant on a specified period. The second condition is that the tenant must actually be occupying the property and the third is that the occupation ought to be specifically for the purpose of the business belonging to the tenant. The last requirement which is not necessarily applicable is that the tenancy must not specifically exclude the existing Law from applying in cases of a dispute. In the case of Please & Co and Pies Ltd tenancy agreement, the four conditions were dully met which sets Pies on a legal ground to pursue all relevant steps and challenges in the unraveling of the current situation. An important step that Pies Ltd needs to ascertain is the legality of the tenancy agreement it has with Please &Co Ltd on the use of a property belonging to Please & Co Ltd. In cases where Pies Ltd establishes that Please & Co is acting illegally in trying to terminate a legally binding tenancy agreement which led to the lease of a rental property, it will pave way for Pies Ltd to seek injunctive relief and damages. However, in the event that the two parties explicitly excluded the application of the Act in their lease agreement or Pies Ltd was given the property for a period less than 6 months, then Pies Ltd will be forced to look for alternative steps in negotiating with Please & Co on the termination of the lease on 23 December 2013.
Perhaps the important consideration after ascertaining the applicability of the lease agreement is that the Act is not applicable and therefore Pies Ltd will not be vindicated in seeking legal procedures in vacating the property as stated in the lease agreement. It has been ascertained that the Act is not applicable in this case and therefore Pies Ltd can vacate the property on or before 23 December 2013 and leave the new occupants under the management of the Please & Co Ltd. The other option is for Pies Ltd to serve Please & Co a notice of vacation as provided for under Section 27 of the Act which allows the tenant to terminate the tenancy only after giving a three months notice to the landlord. However, the tenant is not mandated to give a three months notice to the landlord and can thus exit the premise without necessarily providing prior information to the landlord. A number of factors will thus be put into consideration on the basis of Pies Ltd wanting to exit the premise before the lease period and at the same time leave other occupants in the same premise. These include those whose agreement is with the tenant and not the landlord. According to Senn (2006, p. 23), tenancy and property management in commercial property development is mainly concerned with the creation of an optimal business environment in which the entity can effectively perform its primary functions. He adds that property and tenancy management is a generic term that encompasses the actual business infrastructures such as buildings and company assets which are used in the delivery of services to the customer and ensures that the services are at their best value. Pawlowski (2002, p. 17) takes this higher and argues that facilities management in a commercial environment ensures that services are effective and responsive to the needs of the customer besides allowing changes in future in terms of space usage within the commercial property. Another importance of proper facilities management is that it ensures that services and products are delivered in a cost effective manner while creating a competitive advantage for the business. Furthermore, The Center for Commercial Real Estate (2013, p. 2) posit that strategic facilities management also enhances the image and culture of a commercial property as clients will associate the arrangement of facilities within the commercial property with the value of services and products emanating from the same property.
One of the starting points in the negotiation for a lease deal is the understanding of the areas which are covered in the lease agreement. Pies Ltd ought to ensure that the Please & Co Ltd identifies the areas which are covered by the initial lease agreement that they had. These areas include the amount of the rent and the rate at which it is going to increase throughout the period. Similarly, it is important to ascertain the length of the lease that the two parties had in the first place. It is also important to outline and clearly identify any get out clause entrenched in the lease agreement, for instance, in cases of financial constraints or the need to lease out to a third party and ensure that the terms are agreeable to both parties, that is the landlord and the tenant. The clauses that allow the tenant to transfer the premise to another tenant are what Pies Ltd should use to solve the current scenario. Pies Ltd should also use the guarantee agreement to provide evidence that the accountants will be able to pay the rent for the premise that was initially occupied by them in case they decide to exit the premise at the end of their lease period. It is also important that the lease agreement provide the opportunity for the tenant to renew the lease at the end of the lease period which Pies Ltd can use to retain management of the premise to the new tenants even when they decide to evacuate the premise at the end of their lease period (The Center for Commercial Real Estate, 2013, p. 2).
Another area that will be of interest to the new tenants will be the hidden costs which are associated with the use of the premise. For instance, it is important for Pies Ltd to analysis and ascertains things such as cleaning, heating and lighting which might be included in the rent. Knowing how such costs are calculated will help the Pies Ltd to bargain for the refund in case of extra charges by Please & Co Ltd. Other issues which will be of interest to the tenant are the issue of insurance of the premise and the properties within the premise. Such charges may not be included in the service charge that the landlord expects from the tenants. Similarly, it is important that the lease agreement contain the clause on the cost of repair and whether the tenant is expected to leave the premise in a certain condition at the end of the lease period. Such requirements will be instrumental in helping the tenant to decide whether they want to remain in the property of the expiry of the lease period or leave the property to the landlord to manage the new tenants. It is also important that the tenants agree on the terms of the lease beyond the 23 December 2013 period to avoid future financial obligations which may arise from hidden costs associated with the use if the premise.
Because of the above factors Pies Ltd will have to assess and evaluate the role that Please & Co Ltd has been playing with regard to fulfilling obligations such as carrying out basic repairs to the premise, keeping the basic amenities in the building such as water, electricity, and water in good and working conditions in accordance to the oral agreement that the two had. This is more so because their agreement did not involve the Landlord and Tenant Act which would have given Pies Ltd an upper hand in seeking legal redress for Please & Co demand for compensation for legal undertakings. Moreover, issues related to tort and other disturbances will become applicable because the assumption here is that by agreeing to enter into a private agreement concerning the leasing of a property Please & Co was committing themselves to provide such services like security, peace, tranquillity, generally without any nuisance from the landlord or the neighbours. As such, it is the duty of the landlord to ensure that his premise is in a conducive environment that will allow the tenant to peacefully implement their businesses inside the premise without disturbance. Moreover, the agreement that Please & Co had with Pies Ltd did not outline the kind of business that Pies was to carry out in the premise and thus leasing the premise to a group of solicitors did not amount to violation of the agreement in the initial contract. On their side, Pies Ltd will have to establish without reasonable doubt that they have used the premise in a tenant like manner having caused no damages to the building. Ultimately, this is the assumption to which Pies Ltd will be basing their argument to make decisions with regard to the exit of the premise and decide whether they will remain as guarantors to the premise or the responsibility of the guarantee will be transferred to the new tenants. Pies Ltd will need to follow legal processes since their five year term agreement with Please and Co Ltd is not expired and may be forced to remain as the legal guarantors of the premise until the expiry of their term. Moreover, Pies Ltd will have to review its basic rights as a tenant and ascertain whether those rights include the freedom to lease to the second partner in the use of the premise. The basic rights available to the tenant include the right to rent, claim housing benefits, freedom from harassment and the right to have proper procedures followed when issuing a notice to evacuate the premise (The Center for Commercial Real Estate, 2013, p.1).
Consequently, before deciding whether to retain the use of the premise beyond the lease period, it is important that Pies Ltd ascertain the terms and conditions found in the lease agreement. The tenant may decide to involve the landlord in setting the terms of the lease. However, it is advisable that the tenant does not over-commit in the terms of using the premise but instead should allow for flexible and long term agreement. The size of the business that Pies Ltd is going to use in the leased premise is a good starting point in determining the duration of the lease. Small businesses should negotiate for shorter lease period, preferable two years. It is also important to consider rent increment procedures so that the business owners using the premise are not unexpectedly hit by rent increases without any warning from the landlord which has the potential of compromising the cash flow in the long run. It is also advisable to look out for sweet deals with the landlord because it can be used a means to lock the tenant into the system. Pies Ltd could consider using a broker in leases who is well knowledgeable about the current rates in lease markets and the tricks which landlords are likely to use to over-charge the tenant. The issues surrounding maintenance are also better discussed in the lease agreement before the deal is struck. An essential step is also to read over through the lease to ascertain issue of subleasing, exclusivity clause contained in the lease agreement and the co-tenancy with related business or depended business. This implies that Pies Ltd will also consider the possibility of the property having companies carrying out similar business with what it is doing or those which supply the materials that the company uses. It is also important that the lease agreement encompass the issue of unexpected closure of the company. The lease agreement must therefore protect the interest of all stakeholders involved in the use of the property including the landlord, the tenant, and the customers who are depended on the service or products offered by the tenant of the premise.
Based on the above discussions, it is evident that Pies Ltd is strategic in the efficient and effective management of a premise belonging to Please & Co Ltd. However, the approach to lease agreement needs to be reviewed in a professional manner. For instance, The Center for Commercial Real Estate (2013, p. 1) note that there should be deliberate planning from a facility manager to put the needs of the commercial property in the spirit of differentiating the noncore and core business operations of the property being developed. This will ensure that adequate attention is given to facilities planning and arrangement which will be in tandem with the available resources for implementing a facilities management strategy. Generally, resources such as personnel and finances must be provided for facilities management program conscious of the importance of proper and informed facilities management in a commercial property development. Thus, a conscious plan can imply things like prior identification of the sources of finance to run a facilities management program as an equally important element of the larger strategic plan in development.
This can also involve establishing a budget to cover for both long term and short term needs of the lease management program in order to avoid ad hoc allocation of funds to lease agreements between Please & Co and Pies Ltd during development and use of the demise property. The Center for Commercial Real Estate (2013, p. 2) noted that this should be done by analysing the needs in terms of initial agreement that highlights the use of the premise without regard to the person who is occupying the premises. The agreement entered need to be sufficiently spelled out with relevant rights and benefits to both the landlord and the tenant. The other important step in strategic leased facility management is to develop solutions by looking at the available options and choosing the most efficient one to ensure that implementation of facilities management activities does not detract the overall core business in the development program. In the present of all of the above, an implementation procedure then needs to be laid out and embarked on immediately so that lease management go alongside other development activities (Zankel, 2000, p. 43).
In order to achieve their objectives and missions, commercial property owners and tenants have a responsibility of ensuring that they have a clear path that will lead to this end. One of the tools that are used to give facilities’ managers a clear direction is the strategic plan. It is important that a strategic plan is defined well in terms of the objectives and mission that the owners and tenants of a commercial property wish to accomplish during and after development. Matauschek (2010, p. 76) observes that the strategic role that lease management plays is essential especially where competition for limited resources such as space and land is stiff and the financial resources are limited.
In a commercial lease management, different stakeholders have distinctive roles to play in pursuing the highlighted mission and objectives of the institution. It is important that each facilities managers, as part of the stakeholders in strategic planning should ensure that the objectives are met within a specified period. Before being included in the strategic plan, facilities managers must understand the importance of having the plan and how it is going to be implemented in the process of implementing a development plan in a commercial property. The stability of the commercial property should also be considered first in dealing with any emerging issues with relation to management of property within a commercial property environment. The owners and tenants of the property can contribute to the handling of the emerging challenges and assist the facilities management team to execute that program within the timeline provided. This will assist in avoiding issues of expenses in implementing facilities management that arise with the failure to meet datelines. There is also need to identify any existing need and change within the operations of the facility. Availability of resources, commitment, and capacity are also important aspects in the successful implementation of a strategic plan (Alces, 1995, p. 32).
As the project team is composed of experts and planners, it has the responsibility of ensuring that timelines are adhered to in the process of implementing a strategic plan. The committee is thus responsible for a number of roles including organizing the whole process of planning and scheduling and conducting regular meetings to discuss the process. It is also the responsibility of the committee to ensure that priority is given to the implementation of the strategic plan by enforcing attention to the overall aims and objectives as outlined in the strategic plan document (Brown, 2009 p. 47). This will avoid shifting or changing the priority such as diverting the resources meant for the implementation of a facilities management plan to other matters at the commercial property. It is also important to have the values of the management board and the entire community reflected in the strategic plan. This is important because it will help to build a sense of ownership by the board and the community. They will thus commit themselves to the successful implementation of the plan. After developing the actual strategic plan, the facilities management committee will also be mandated to regularly review the progress in terms of the mission and vision statement of the facility. The committee also has the responsibility to monitor factors like trends, demographics, community, and technology in contemporary and best practices in lease management which might impact in one way or the other on the successful implementation of a successful facilities management strategic plan (Alexander, 1990, p. 45).
In conclusion, several factors will form the basis on which the tenant will have to decide whether they want to continue using the property leased by Please & Co or not. It is important that Pies Ltd carry out a needs analysis to determine its rental needs and if it is going to be able to raise the increased rental fee in case of a new lease agreement. Pies Ltd might consider using a project team to analysis it needs in terms of space and other factors. Some of these factors may include things like the costs associated with lease renewal or relocation. Corporate objectives will also form an important factor to consider because the company may be planning to expand its operation in a few years time and continued occupation of the current premise may not suffice its objectives. Moreover, it is important to consider the location, image, and the amenities available to the company. Since Pies Ltd has been occupying the building for the last five years, it customer base might have grown tremendously which may necessitate the need for a new rental premises or better still purchasing of a permanent premise. Generally, the tenants must first of all consider the efficiency and desirability of the current space and be able to decide whether they still want to use the premise. The sizes of the offices, open areas available and the warehousing area must also be considered. Finally, it is important to consider the finishing standards and availability of extra space in case the company wants to expand (The Center for Commercial Real Estate, 2013, p. 1).