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We are experienced in advising tenants wanting to lease commercial property. Tenancy agreements can be legally complex, so it’s important to take legal advice on the implications of the terms if you wish to protect yourself from potentially substantial liabilities further down the line.
When you instruct us, we will review the title of the landlord to the property to ensure that it has a right to grant the lease, and that there are no restrictions in that title that would prevent the tenant’s use of the property. We also carry out searches against the property to ensure that there were no adverse matters that could either restrict the use of the property or make the use of the property more expensive. In some circumstances it may be appropriate to carry out an environmental search to ensure that the land concerned isn’t contaminated.
Below are some of the issues that we consider when advising tenants on a commercial lease:
The extent of the property and any rights needed to access the property.
Does any access extend to a public highway? Are other adequate rights granted including rights for parking, storage of refuse, rights to enter adjoining properties to carry out works to utilities or to repair the property.
Responsibility for Repairs
The lease will define who is responsible for repairs to the property. Landlords usually try to pass all repairing obligations to the tenant so that the tenant must hand back the property to the landlord in a good state of repair and condition even though when the lease commenced there were substantial problems with the property. It may be appropriate to add a schedule of condition to the lease which will limit the tenant’s obligations at the expiry of the lease. This could save the tenant a considerable sum.
Alterations
Does the tenant need to alter the property? There need to be provisions in the lease that allow the tenant to apply to the landlord for consent to make changes to the property and for that consent not to be unreasonably withheld or delayed.
Statutory requirements
It is likely that the tenant will be obliged to comply with all statutory requirements relating to the property, such as those relating to accessibility of the building under the Disability Discrimination Act and Equality Act. The costs associated with making a building accessible could be considerable.
Insurance
It is likely that the landlord will insure the property and that the tenant will reimburse the landlord for the full amount of the insurance premium. Is the rent payable under the lease suspended in case the property is damaged or destroyed so that it is not capable of use? What happens if the landlord’s insurance does not cover the destruction or damage? It is possible that the landlord may seek to require the tenant to rebuild the property at its own cost.
User
Put simply, is the use clause wide enough to allow for the tenant’s proposed use of the property?
Assignments and sub-lettings
The lease should provide for the tenant to assign the benefit of the lease. It is possible that the outgoing tenant may be required to enter into an authorised guarantee agreement that requires the outgoing tenant to guarantee that the incoming tenant will comply with the terms of the lease. The tenant may seek to have a right to underlet the whole or part of the property if it needs to reduce its costs.
Rent/Service Charge
VAT may be payable on these costs. What costs can the landlord recover under the service charge and do these costs include improvement of the landlord’s adjoining property at the tenant’s cost?
Rent Review
The lease may be provide for the rent to be reviewed to the open market rate. There may be limits or minimum rent increases set.
Landlord and Tenant Act protection
This protection allows the tenant to apply to the Court for a new lease at the expiry of its current lease; this allows it to maintain its business in the same property.
Break Clauses
Either the landlord or the tenant may have a right to terminate the lease early subject to providing a period of notice.
We also assist tenants with the following documents:
- Licences to Assign – The tenant may need to assign its property at some time in the future if it is no longer suitable for its purposes.
- Licences to Underlet – The tenant may want to remain as tenant but allow another party into the property to generate additional income. This licence permits an underlease.
- Rent Deposit Deed – The landlord may require the tenant to provide security for its performance under the lease but the tenant needs to ensure that the landlord may not arbitrarily take the deposit monies.
- Licence for Alterations – This document allows the tenant to carry out alteration works to the property.
When it comes to entering into a lease for a commercial property, prevention is better than the cure, so it’s advisable to take legal advice from the outset. It can also save you significant costs if things go wrong in the future.
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