Analysis – Tenant inducements

Providing inducements to tenants to take up leases on acceptable terms is key in times of economic downturn vacant properties and low market rents. Incentivising tenants to enter into leases at what are in effect higher than market value rents can assist a landlord in obtaining an increased sale value for a property or probably more importantly in this market avoiding breaches of any interest-cover or loan-to-value covenants applicable to any financing taken to acquire the property (or to assist with any refinancing). This article is intended to be a summary of the tax treatment of the most common forms of tenant inducement offered to enter into new leases. This article assumes that the landlord and tenant are both UK resident unconnected companies (although the same principles broadly apply for individuals trustees partnerships and other non-corporate entities) and that the landlord has opted...