ABSTRACT
Prelets, unsurprisingly, are usually on "institutional" terms, either because the developer is itself an institution, or is being funded by one so must bow to that institution's requirements as to the form of lease. Speculative development in the late 1980s contributed significantly to the changes in lease terms in the 1990s. Landlords maintain that tenants want longer leases to facilitate the writing off of their fit-out costs. One predicted downside of shorter lease terms is their effect on development. Long leases and the income they generate for developers and lenders have historically facilitated development in the United Kingdom. The financing of standing investments has always been a relatively straightforward matter for lenders where the property is let to a satisfactory covenant. The capital value of an investments property and its ability to service debt are both predicated on cashflow from the property and the likelihood of it being relet if the tenant departs.
