Top Tips on Commercial Leases from Georgina Walters, Head of Property Law

 With the recession beginning to bite, many occupiers of rented property are looking to move to less expensive premises or reduce the space they currently occupy. If you are thinking along these lines, here are some tips from Georgina Walters, Head of the Property Law Department at Salisbury Solicitors Bonallack and Bishop, which may help you determine your course of action.

• Read your lease. It is surprising how many times problems arise because the tenant isn’t familiar with the lease. For example, most quarterly leases with a notice period require the tenant to pay the rent until the end of the subsequent quarter. Failing to give notice at the right time can be an expensive exercise. 

• Check the position on dilapidations. Hopefully you will have made a detailed schedule of the condition of the premises when you moved in. Agree with the landlord early on in the proceedings, the dilapidations for which you are responsible – it may well be cheaper for you to make any necessary repairs than for the landlord to have them done and for you to then foot the bill.

• Check the position regarding payment for utilities, rates and so on. Especially, make sure you check the position as regards insurance. 

• Remember that your landlord is likely to be a realist and may well prefer you (a known, good tenant) to stay in occupation at a reduced rent than for the  premises to be unlet or let to a tenant of unknown quality. There may well be room for negotiation if you would really rather remain in your current premises at a lower rent than move out. 

• If you do move, make sure that you are not breaking your contract of employment with your employees — for example if you decide to move your premises to a new town and existing employment contracts refer to working in the town where your current premises are situated. A properly drafted employment contract should avoid this risk, but it does happen.

• If you are assigning your lease, check the position as regards the guarantee of the incoming tenant’s obligations. This can operate as a ‘double whammy’ as not only can you find yourself landed with an unexpected liability if the new tenant defaults, but your bank may well want to keep your account on a tighter reign while the potential liability hangs over you.