Commercial mortgage holders may be affected by lease declaration

28 February 2011

Written by Jenny Barrett

Commercial mortgage holders may be affected by plans to change the way companies declare their leases.

According to the Scotland on Sunday, proposals by International Accounting Standards that would see companies record the whole of a 25-year lease as a liability, rather than declare it on a year-by-year basis could negatively affect developers.

Partner at PricewaterhouseCoopers Mark Hoskyns-Abrahall said: "The implications are very significant, especially if you think about retail companies.

"They are all of a sudden going to have to put a huge asset on their balance sheet but also huge liabilities."

The plans are designed to stop off-balance sheet accounting, but the news provider said they may encourage a move toward short-term leasing, which could pose problems for some developers or commercial property.

A leaked email from Scotland's first minister Alex Salmond was recently reported to propose higher rates for owners of empty commercial properties.

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