Adam Bromley at Forbes Solicitors advises on what to consider when entering into a commercial lease
For some landlord and tenants it is tempting once lease terms have been agreed to either download a commercial lease precedent online or to cobble a document together themselves. However this will most likely be disastrous for all parties involved and can lead to disputes later on down the line due to inappropriate provisions being included or important terms omitted.
As such it is highly advisable whether you are a landlord or tenant to obtain proper legal advice when entering into a commercial lease. Once heads of terms have been agreed between the parties the landlord should instruct solicitors to draft the lease to send to the tenant for approval. Along with the annual rent payable and length of term, the following terms should be considered:
Break clauses are a crucial provision for tenants enabling the lease term to be terminated early. This requirement is often dictated by commercial needs such as the premises no longer being suitable to house a growing business, or if the business has taken a downward turn the rent may be unaffordable. Restrictions on the ability to exercise a break should be carefully considered so that the tenant is not trapped in a lease it no longer requires.
At the end of the lease term the condition of the property and dilapidations can be a source of contention between landlord and tenant. A landlord will want to ensure that the lease includes obligations on the tenant to keep the property in a good state of repair. From a tenant’s point of view it is advisable for its liability to be limited by putting a schedule of condition into place. In addition the property should be properly defined so that the repair obligations are clear.
It is important that the lease clearly provides which party is to be responsible for insuring the property. The landlord will usually want to retain control and insure the property to ensure that its interest is properly covered. The tenant will then be required to reimburse this cost by way of an insurance rent. A tenant will want to guarantee that the lease provides for the landlord to reinstate the property should it be damaged or destroyed by an insured risk. Both parties should also consider including termination provisions to allow for the lease to be terminated if the property is not ready for occupation within a specific time frame.
Security of Tenure
The Landlord and Tenant Act 1954 provides a tenant with a rebuttable right to remain in occupation even if the lease has come to an end. Landlords should therefore consider early on whether this right should be excluded from the lease. If so it is imperative that the procedure for excluding security of tenure is complied with to ensure that the landlord can regain possession of the property at the end of the term.
If access to the property is required over the landlord’s neighbouring premises then this should be provided for within the lease. In addition if it has been agreed that the tenant is to have a right to use any car parking spaces belonging to the landlord then this should also be expressly included.
For further information contact Adam Bromley at Forbes Solicitors on 0333 207 1158 or firstname.lastname@example.org