A lease is a legal document that regulates the use of a property. They often contain clauses which are onerous to landlords and tenants alike and can be very complex. Whether you are a landlord or a tenant, buying a lease of a commercial property or buying a freehold commercial property with a lease and tenant in place, the golden rule is buyer beware. Landlord and tenants always need legal representation because if detailed, expert advice regarding the key clauses such as rent, rent review, break clause, insurance, repairs and the length of the term, is not obtained you could be tied into a long and expensive lease that does not meet you requirements. You can be certain that the other party will have a lawyer acting for them so you will need a legal expert on your side to look after your best interests; that is where our team of specialist commercial lawyers can help
Some key areas to consider when negotiating leases include:-
The length of Term
The most suitable approach will always depend on your business and individual circumstances. Some tenants may prefer shorter tenancies in case they need to move to bigger premises as their business grows while others want a longer term providing stability. Landlords may think the longer a lease the better but there are many factors to consider. Our business lawyers can provide bespoke advice specific to your to business, for example, by including clauses which allow one party to terminate the lease early.
Rent and rent reviews
Most leases have provisions that allow the rent to increase over the term. The aim is to ensure the rent remains fair over the rental period. Rent review clauses are extremely complex and have been the source of much litigation. Therefore it is imperative landlords and tenants obtain expert legal advice to avoid any costly increases in the future.
Obligation to Repair
A tenant must fully understand which part of the property, if any, they are responsible for maintaining and repairing. It may be just the interior of the property or the entire building. The landlord may be responsible for some repairs with the tenant paying a contribution. However it is worked out a landlord and tenant needs to know who is responsible. Otherwise they could be in breach of the lease terms exposing themselves to costly litigation. Our commercial property team give straightforward explanations so you can avoid this potential pitfall.
Often a lease will require the landlord to provide services to the tenants of a building or industrial estate. The types of services depend on the nature of the property but commonly include, maintaining common parts and footpaths, cleaning and decorating the exterior of the property. In return the tenant reimburses the landlord for these costs. If a tenant rents part of a building, for example a ground floor shop, then they may have to pay for part of the landlord’s building insurance premiums. The amount of service charge payable is rarely a fixed figure and tenants need to know what they may be paying for in the future. Also there are strict requirements regarding the enforceability of service charges. If expert legal advice is not sought landlords may find they are unable to reclaim money from tenants from costly works because they have not followed the correct procedures. We ensure landlords and tenants are fully aware of service charge provisions and their implications prior to agreeing a lease or buying a property subject to a lease.
Assignment or Subletting
Assignment is the ability to sell or transfer the lease to another tenant, an assignee. Subletting is when a tenant lets the property to a tenant of its own, called a subtenant. While these are common clauses it is important that landlord have appropriate safeguards included in the lease to ensure the incoming tenant complies with the lease. Similarly tenants, assignees and subtenants need to be aware of their obligations and the consequences if they do not. Extra documentation, such as rent deposits, licences to assign and authorised guarantee agreements, may be needed.
The Authorised use of the Property
The lease should state what the property can be used for. Competing interests arise here as a tenant will want the user clause to be a wide as possible so they can obtain a good price should they wish to assign or sublet in the future. However a landlord will usually want to ensure the tenant cannot change the use to one which would attract a lower rent. This is a careful balancing act but with our substantial experience in negotiating commercial leases we will ensure your interest are protected whether you are a landlord or a tenant. Tenants also need to consider whether planning permission would be needed for their desired use. Our planning lawyers can give expert advice on this and assist with planning applications if necessary.
Security of tenure
Business tenants have the right to request a new lease on similar terms from the landlord at the end of a commercial lease, unless the appropriate action is taken before a lease is signed and completed. The landlord may only refuse on certain grounds and even then compensation may be payable. Tenants may want to keep this security of tenure to avoid disruption to their business at the end of the term. However a landlord may want the flexibility to re-negotiate a lease renewal on different terms. Security of tenure can be excluded before a lease is completed but a specific procedure must be followed and a lawyer is always required to do this.
Managing commercial units and buildings can be a time consuming and expensive job and, therefore, we manage a wide range properties on behalf of landlord clients, who we acted for when they bought and leased the property originally. This means our lawyers already have extensive knowledge of your property and circumstances so they can hit the ground running. In addition to collecting rent we handle all aspects of commercial property management from rent reviews and renewals to repairs and rent recovery all for a single monthly fee.