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We have extensive experience acting for landlords and tenants and negotiating lease agreements and associated documentation. These are some questions we are often asked
Do I need to take legal advice if I am just renting commercial premises or can I do it myself?
Entering into a lease, however big or small the premises is, is a major financial commitment for you and your business. Leases are often 60-70 pages long and you need to ensure you understand all the terms and are aware of the obligations and liabilities you would be taking on.
As leases are mostly drafted by the Landlord’s solicitor, they tend to be drafted in favour of the Landlord so it is important to ensure that any potential issues for a Tenant or points to be negotiated are highlighted at the outset and unfair terms are amended or removed.
A lease for a term of more than 7 years must be registered at the Land Registry and there are other registration formalities which must be may need to be dealt with for leases with a shorter term.
You may be liable to pay Stamp Duty Land Tax, which is calculated on the rent over the term, and an SDLT may need to be submitted to HMRC.
It is therefore highly recommended that you obtain expert legal advice before you enter in to a legal document. Our extensive experience and knowledge means we can negotiate a better deal for you and help you to avoid any potential costly mistakes.
What are the advantages of taking legal advice before entering in to a lease?
If you enter in to a lease without obtaining legal advice then you are risking not understanding exactly what you are taking on. We have the expert knowledge to be able to guide you through the process from the outset through to completion, explaining all of the rights, responsibilities and obligations of both the Landlord and the Tenant so that you understand everything before you agree to the lease.
A lease is legally binding so it is extremely important that you understand the commitment you are making.
Will I need to reinstate the premises to its original condition when I leave or is this the landlord’s responsibility?
It is usually the case that at the end of the lease term, the Property will need to be returned to the Landlord in accordance with the provisions of the lease. This means the Tenant’s repair and decoration obligations within the lease must be complied with any alterations made to the Property would need to be reinstated (unless otherwise expressly agreed with the Landlord), and any damage caused by removal of those alterations made good.
It is recommended that you discuss and agree with your Landlord what will need to be done at the end of the lease term so that you can make sure the necessary works are carried out before the lease ends.
If the Landlord identifies works which need to be carried out then they may serve a schedule of dilapidations on you setting out those works and the cost of the same. This can be negotiated with the Landlord and it is recommended that you obtain advice from a qualified surveyor if this situation does arise as dilapidations can be costly.
I am interested in taking a lease of commercial premises - how can I negotiate the best deal for myself?
If this is something you have not done before, it is highly recommended that you seek professional advice from a commercial property lawyer. When agreeing the terms at the outset, you may also want to obtain professional advice from a surveyor.
You may be able to negotiate tenant friendly terms such as:
- An initial rent-free period – this will give you time (usually 3-6 months) at the start of the term to fit out the premises ready for trade
- A break clause – this is an option for you to terminate the lease at a time during the lease term if things are not working out how you had planned (i.e. an option to break at year 3 year of a 5 year lease term)
- Limited repair obligation – this may be limited to a photographic schedule of condition which evidences the state of repair of the property when you take on the lease so that you are not obliged to put the property in to a ‘better’ state of repair when the lease ends than it was at the start of the term.
It is usual for a Landlord to have a surveyor acting on their behalf and they will be acting in the Landlord’s best interests, not the Tenant’s. If you do not obtain advice from your own surveyor then you should research the market as best you can so that you are aware of the ‘going rate’ for rents of similar properties. From start to finish, you can expect a lease to take 8-10 weeks and you should never feel pressured into rushing the deal.
What are my rights as a tenant of commercial premises?
Once you have entered into a lease, provided you comply with all of your obligations in the lease, you have the right to carry out your business from the Property without interruption from the Landlord. You will need to consider whether there are specific rights required to occupy the Property and carry out your business (such as rights of way and services from neighbouring premises owned by the Landlord) and these rights will be set out in the lease. You will also need to ensure that you understand your rights, and any requirements of the Landlord, should you wish to assign or sublet the Property.
What do I do if I want to change the use of the premises?
Usually the permitted use of the Property will be set out in the lease and it will also set out what you cannot use the Property for, and whether you require the Landlord’s consent to any change of use. You should also be aware that you may need planning permission to change the use of the Property and you should check this with the Local Authority. The Town and Country Planning (Use Classes) Order 1987 (as amended) sets out what changes of use do and do not require planning permission. There are also general development rights which allow change of use from one class to another without permission.
If you require a change of use which requires planning permission before you enter into the lease, then you may wish to consider entering into an Agreement for Lease conditional on you first having obtained that planning permission to avoid a situation where you have entered into a lease of a property you cannot trade from.
Can I make alterations to the premises in my lease?
This depends entirely on the terms of your lease. For example, a short lease of an office within a building is likely to prohibit all but basic changes to a property whereas a lease of a stand-alone building is likely to allow bigger changes. If you do wish to make any alterations to a property then you should discuss these with your Landlord (it is likely you will also require their consent) and ensure that you have obtained any required planning permission and/or building regulation approval for the works.
My landlord is suggesting a significant increase in the rent at the next rent review -what can I do?
You should check the rent review provisions contained within your lease. It is usual for rent to be compared to the market rent in that area. If you are concerned about the increase suggested then you should seek professional advice from a local surveyor as they will have knowledge of the area and will be able to advise on what is reasonable. You should note that any rent increase usually disregards improvements you have made the property.
What are my options if I no longer want the premises?
A lease is a legally binding contract whereby you commit to take the premises and pay the rent for a set period of time. Your lease may however contain one of the following ‘get out’ clauses:
- A break clause – you can terminate the lease on a set date by serving notice to end the lease early. You should ensure the terms of the break clause are followed exactly.
- Assignment – your lease may allow you to assign the lease to a third party meaning they will take over the lease for the remainder of the term. You should note it is likely you will require the Landlord’s consent to this and the Landlord is entitled to refuse consent if they do not think the incoming tenant is suitable. You may also be required to enter into an agreement which guarantees the performance of the incoming tenant until the lease ends or they themselves assign so this may not be a ‘clean break’ for you.
You may also be able to end the lease by Surrender:
- Surrender – your Landlord may agree with you that you can surrender the lease (end it early by deed). This would usually mean you are responsible for the Landlord’s legal costs and the Landlord may also require a payment to do this. The Landlord is under no obligation to agree to a surrender.
It is strongly recommended that you obtain legal advice before entering into a lease so that you are aware of your options before you commit to the lease.
The landlord is refusing to renew the lease of my commercial premises. What can I do?
If you have what is known as ‘Security of Tenure’ then at the end of the lease term, you have a statutory right to renew your lease on substantially the same terms as your existing lease, at market rent. The Landlord is not able to oppose this renewal unless:
- You have not paid the rent up to date or have been persistently late in paying the rent.
- You have breached the tenant obligations in the lease.
- The landlord wishes to occupy the premises for its own use or they wish to redevelop the premises (although note they will need to provide evidence of this and serve the relevant notice on you).
If however you do not have Security of Tenure, then you will not have this right. The lease will have had to have been excluded by a specific statutory procedure before the lease was completed which will have included you signing a Statutory or Simple Declaration.
If you believe you have Security of Tenure then you should obtaining professional legal advice on your options. You may be entitled to statutory compensation if the Landlord does not have sufficient grounds to oppose your renewal.
