Specialist Commercial Leasehold Property Lawyers
Thinking of taking on a commercial lease? Here are some handy tips from our experienced commercial property team when renting commercial property.
- 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. Dilapidations are the repairs that are required, during or at the end of the lease, to remedy any disrepair – and normally to put the building back in the same condition as it was at the beginning of the lease).
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.
- If you do move, make sure that you are not breaching 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 on 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.
Moving premises is a serious business and we strongly advise that it should not be undertaken without the benefit of specialist legal advice from specialist commercial lease agreement solicitors.
Need a specialist commercial property lawyer? Call us on FREEPHONE 0800 1404544. Initial legal advice on the phone is always FREE.
Commercial Property Leases – 7 Common Mistakes Concerning Rent Reviews and Service Charges
Renting commercial property is a complex area, particularly as regards rent reviews and service charges. Listed below are seven common misconceptions and problems that could arise and some straightforward answers about your rights as a commercial tenant
1. I cannot challenge the increase in rent that the landlord has imposed.
It all depends upon the terms of the lease. The landlord’s ability to change or ‘review’ the rent is a very important part of the lease. It requires careful consideration when the lease is being drafted.
2. I am negotiating a new rent with my landlord. The rent is likely to increase as the landlord has insisted that the rent is assessed as if the lease were for 10 years even though the unexpired term is only 5 years.
Rent review is a very complex area and whether or not the landlord is permitted to do this will depend on the terms of the lease. The terms of the rent review clause in the lease require careful consideration when the lease is being negotiated and when the rent is being reviewed.
3. Under my rent review clause, the landlord is permitted to serve a notice specifying the new rent. Unless I object to this rent within a specified period of time, the landlord is entitled to enforce this rent regardless of how high it is.
Yes, they might be able to!
Rent review is a very complex area and whether or not the landlord is permitted to do this will depend on the terms of the lease. The terms of the rent review clause in the lease require careful consideration when the lease is being negotiated and when the rent is being reviewed.
4. My landlord should have exercised his right to review the rent 18 months ago. But as rents were depressed then, he has waited until now when they have risen. He is now proposing to increase the rent and backdate it to last year.
Whether or not the landlord can do this will depend on the terms of the lease. Often leases will allow the landlord to increase the rent even after the specified day. The lease should provide that whenever the rent is reviewed it is always reviewed as at the stated rent review date. This is to avoid situations where landlords wait for the market to improve before starting the review. We can advise on all aspects of rent review and protect your interest when your business lease is being negotiated.
5. I cannot challenge the alteration to the service charge contribution that the landlord has imposed.
This will depend on the terms of the lease.
6. I pay a service charge. I am unhappy as to the amount the landlord claims he is spending. However, I am obliged to contribute to this via the service charge.
Service charges are a very complex part of the lease and need careful consideration when the lease is being negotiated. There is, however, a Code of Conduct for Service Charges that may give you rights over and above those in the lease.
7. I pay a service charge and the landlord has provided 12 months certified accounts detailing expenditure. Can this be challenged?
Matters such as this should be covered in the lease. The Code of Conduct for Service Charges may also provide some protection.
Commercial leases can often be long and complicated. Agreeing to the wrong terms in the original lease, or failing to understand the meaning of your rights under that lease subsequently, can be very expensive. To avoid losing out, to avoid the risk of getting stuck in a commercial property dispute, make sure you get the advice of an experienced commercial lease solicitor both on the drafting of the original lease and on any subsequent interpretation.
Getting the right legal advice from an experienced commercial property solicitor can be critical in protecting your interests in the negotiation of the original lease.
Looking to end your business lease?
Click here to read more about the options and what to watch for when you come to commercial lease termination
At the end of the lease, who is responsible for outstanding repairs and decoration?
What the landlord and tenant are each required to maintain will be defined in the lease and specifically in the landlord and tenant’s respective covenants. And most commercial leases are FRI – fully repairing and insuring leases.
A Schedule of Condition is usually prepared at the outset of the lease in order to limit a tenants repairing obligations and ultimately liability to dilapidations at the end of the term. Any repairing covenant in the lease will need to be amended if it’s been agreed that the tenant is not required to put the property in any better condition than evidenced by the schedule of condition which is then annexed to the lease. Taking photographs and attaching those to the schedule is often a really useful way of proving exactly the state of the building on day 1 of the lease.
Alterations and additions are something different. Most leases prohibit them without Landlords consent or Licence ( normally provided by way of what is known as a “Licence to Alter”). Most Licences include an obligation to remove them and reinstate the original condition if required by the Landlord
If a new Lease plan is required as a consequence of authorised alterations or additions it will be dealt with in that Licence or under this referred to as “a Deed of Variation.”
Problems with breach of a business tenancy? Thinking of forfeiture?
Trying to forfeit a commercial lease is a last resort. And as such, the law and procedure around it are complex and need to be complied with very carefully. Our property dispute team have plenty experience of forfeiture.
Click here to read more about forfeiture of commercial lease
Specialist team for property investors
We are involved in purchasing commercial property for property investors – especially for commercial to residential conversions (senior partner Tim Bishop has experience of commercial conversion himself).
Click here to find out how our property investment team could help you.
