News

Tenants attack landlords over privity stance

News

Estates Gazette

18 May 1996

Tenants are up in arms over landlords’ attempts to reinstate some of the principles of privity of contract.

The PMA, which represents 200 retailers, is opposing a package put forward by the Association of British Insurers in February, one month after the privity reforms were enacted.

One of the ABI’s most controversial suggestions was that landlords should require the assignor of a lease to act as an authorised guarantor for its assignee.

Raefe Watkin-Rees, president of the PMA, said: “Tenants would like to see privity abolished completely and they are understandably concerned at any attempt to dilute the intentions of the Act. The ABI’s proposals are seen by many as trying to reinstate the doctrine of privity of contract.”

David Stathers, a former PMA president and director of estates at Boots said: “The ABI’s proposals put us back to the position prior to the privity changes.”

He claimed that the ABI’s move could even force the government to intervene and tighten the existing legislation. “If the government sees the ABI’s suggestions as setting a new industry standard – designed to protect investors from risk – then it may think the market is not regulating itself and intervene,” he said.

Nick Price, chairman of ABI’s property investment panel and director of Norwich Union Invest-ment Management, defended the landlords’ position to an audience of 100 retailers at NU’s fourth annual retailers’ conference.

“We are not trying to claw back privity, but there are some principles of sound commercial sense which we need to protect,” he explained to EG.

“My understanding from Norwich Union’s experience is that, in many cases, the principles are acceptable with little or no modification.

“Where a tenant really has a problem, we’ve agreed a mutually acceptable situation, and we have not lost any tenants through a failure to agree on this revised approach to assignment.”

The PMA and other lobbying groups, including the British Retail Consortium and British Property Federation, are expected to comment formally on the ABI’s proposals in July.

Tenants are up in arms over landlords’ attempts to reinstate some of the principles of privity of contract. The PMA, which represents 200 retailers, is opposing a package put forward by the Association of British Insurers in February, one month after the privity reforms were enacted. One of the ABI’s most controversial suggestions was that landlords should require the assignor of a lease to act as an authorised guarantor for its assignee. Raefe Watkin-Rees, president of the PMA, said: “Tenants would like to see privity abolished completely and they are understandably concerned at any attempt to dilute the intentions of the Act. The ABI’s proposals are seen by many as trying to reinstate the doctrine of privity of contract.” David Stathers, a former PMA president and director of estates at Boots said: “The ABI’s proposals put us back to the position prior to the privity changes.” He claimed that the ABI’s move could even force the government to intervene and tighten the existing legislation. “If the government sees the ABI’s suggestions as setting a new industry standard – designed to protect investors from risk – then it may think the market is not regulating itself and intervene,” he said. Nick Price, chairman of ABI’s property investment panel and director of Norwich Union Invest-ment Management, defended the landlords’ position to an audience of 100 retailers at NU’s fourth annual retailers’ conference. “We are not trying to claw back privity, but there are some principles of sound commercial sense which we need to protect,” he explained to EG. “My understanding from Norwich Union’s experience is that, in many cases, the principles are acceptable with little or no modification. “Where a tenant really has a problem, we’ve agreed a mutually acceptable situation, and we have not lost any tenants through a failure to agree on this revised approach to assignment.” The PMA and other lobbying groups, including the British Retail Consortium and British Property Federation, are expected to comment formally on the ABI’s proposals in July.