CPB advised to seek out real tenants

When a lease contract is renewed, the existing tenant and landlord should be treated fairly and new rents set close to market rates, says property expert Assoc Prof Manop Bongsadadt.

Landlords, particularly institutions such as Chulalongkorn University (CU) and the Crown Property Bureau (CPB), should favour real tenants who will renew a lease contract directly with them.

"Real tenants should stay or make a living on the rental property. If they sublease the place to second, third or fourth tenants, then they are businessmen and should be screened out," he said.

As an adviser to CU's Office of Property Management, Assoc Prof Manop said the office has experienced the same problem CPB faced two days ago with the existing tenants in Chalerm Larp Market.

"If tenants are unhappy [with higher rents or other conditions], then we need to negotiate with them, giving them a grace period to prepare and asking them what they want. If they are still unhappy with what we offer, both sides will meet in court," he said.

Two years ago, Siam Square tenants were unhappy with higher rents after their leases expired, but CU found less than 20% of them were the real tenants.

In some cases, their rents were as high as 500,000 baht a month, 10 times higher than the contracted tenant pays to CU.

For contract renewal, rental rates should be in line with market rates to prevent subleasing, said Assoc Prof Manop.

CU renewed its lease with the MBK Group at market rates.

MBK will pay rent of 650 million baht a month from next April for 20 years, up from 85 million baht a month it has paid during the past 20 years.

CU will not allow subleasing, requiring any new tenants to notify CU and sign a new contract.

It sometimes checks to see if tenants are real tenants or sublessees, he said.

A property consultant source said dealing with a large group of tenants when the lease expires could be troublesome, as most are unlikely to move after settling in for a long period.

"This is especially true if the rental rates tenants pay are lower than the current market rates," said the source.

"A win-win situation in such a case is impossible. This is a lesson learned for those renting out to small tenants, as it's very difficult to deal with them."

The source said Platinum Fashion Mall opposite Chalerm Larp charges rent of up to 1 million baht a square metre.

About the author

Writer: Kanana Katharangsiporn
Position: Business Reporter