Whether the premises you own are for office, warehouse, industrial, retail, restaurant or storage use, or you are the landlord or the tenant, we can offer you expert advice on all aspects of commercial leases.
We also advise on the importance of protected tenancies and whether they can be created or avoided by virtue of the Landlord and Tenant 1954 Act. We are able to call on expert advice from our Employment Law or Dispute Resolution team where necessary.
We regularly act for both landlords and tenants in the granting of or taking a lease of business premises.
From the outset, we can assist you on agreeing heads of terms, a document which outlines the main issues relevant to your transaction, so as to achieve the best and fairest position possible for you with a view to avoiding any future contentious negotiations. This is of particular benefit to clients who are not used to transactions of this kind.
Whether it is a short licence to occupy or a virtual freehold lease of 999 years, we strive to keep fees for the work we carry out proportionate to the transaction.
If you are a commercial property tenant, your lease is likely to contain a clause that allows you to assign your lease to a new tenant. This involves essentially selling on the lease to the incoming tenant, (the 'assignee').
If you are the outgoing tenant assigning your lease it is important not to inadvertently break the terms of your lease. If you are the incoming tenant, it is important to fully understand the requirements of the lease you will be taking on. We are experienced in carrying out the necessary due diligence for both outgoing and incoming tenants in the form of searches, enquiries and reviewing title and the lease terms. We are also experienced in advising incoming tenants on other issues arising in association with a lease such as rent deposits or obtaining consent to alterations to the premises to allow the business to be carried on to operate effectively.
We can advise on lease renewals for protected tenancies under the Landlord and Tenant Act 1954, negotiating terms that are within the limits of that Act, as well as on leases not protected by the Act where there is more flexibility on the negotiations.
For a commercial lease renewal, you will need to inform your landlord 6-12 months prior to the lease’s expiry date that you wish to renew the lease and state the terms you require under the new lease. In either situation, we can approach the renewal by preparing a new lease with reference to your expired lease or take the opportunity to improve your position under the lease. In the event of any dispute of a renewal of a protected tenancy, we can work closely with our Dispute Resolution team who are highly experienced in this area.
If you are a landlord or tenant and require further advice on commercial property leases, please contact a member of our Commercial Property team based in Canterbury, Ashford and Herne Bay.
Whilst annual rent will be agreed prior to entering into a lease, it is essential to consider provisions for varying the annual rent during the term of the lease to reflect changing market conditions.
As such, a lease will often specify that rent reviews will take place on every third or fifth anniversary of the commencement of the lease.
In addition, a landlord will often seek to set a rent review for the penultimate day of the lease term (especially if the lease is one that will give a tenant security of tenure).
An FRI lease is a Full Repairing and Insuring lease which obliges the tenant to meet the costs of all repairs and insurance, both internal and external. In practice, the landlord will usually obtain the insurance and the tenant will be invoiced to meet this cost. Where the tenancy is in a multi let building, the landlord will usually carry out repairs to the common areas and again will seek repayment of a proportion of the cost through a service charge.
An IRI lease is an Internal Repairing and Insuring lease whereby the landlord is responsible for the costs of external and structural repairs. The tenant is only responsible for repairs to the internal areas of the property and again the landlord is likely to seek repayment of a proportion of costs for repairs to common areas through a service charge.
A break clause is a clause that is included in a lease to allow the tenant or the landlord (or both) to end the lease before the contractual termination date specified in the lease. Such a clause can be drafted to be exercisable on a rolling basis, at any point throughout the term or, if preferred, on one or more specific dates. A break clause can be drafted to only take effect if specified conditions have been met such as all rents being paid up to date.
A landlord can only exercise a right to break if the lease is one that is ‘contracted out’. Only a tenant can exercise a right to break a lease where the tenant has security of tenure.
A rent deposit is a specified sum of money, usually calculated on the basis of a particular number of months’ rent, and is payable by the tenant. The landlord will hold this as security for the payment of rent and the tenant’s performance of the tenant’s covenants in the lease.
A rent deposit deed should be entered by the landlord and tenant alongside the lease to regularise the terms under which the deposit is held and this will specify the circumstances in which the landlord can access this fund, such as where the tenant has not paid rent on time.
A rent deposit may be required where the tenant is a new company with no filed accounts or where no references are available prior to entering the lease.
Unless your lease is ‘contracted out’ (the security of tenure provisions of the Landlord & Tenant Act 1954 are excluded), the lease of your unit will not come to an end at the expiry of a fixed term and instead will continue unless it is terminated in a manner specified by that Act. This is known as security of tenure.
If you have security of tenure, the landlord will have to serve you with a specific notice (Section 25 Notice) and this will either state that the landlord opposes the grant of a new lease or it will say that the landlord has no objections to the grant of a new lease and will set out the terms for that new lease. You also have an opportunity to request a new lease (Section 26) if the landlord does not serve you with a Section 25 notice. If you are content to stay put, you can do nothing which means that after the contractual term ends you will be ‘holding over’. In these circumstances the terms of the old lease continue after the end of the contractual term until such time as the procedure under the Act is triggered either by a Section 25 notice or a Section 26 request.
If your lease is contracted out then upon reaching the end of the contractual term of the lease, you will have no right to remain in the unit and the landlord is under no obligation to grant a new lease to you.
When considering taking a commercial lease, it is always advisable to carry out due diligence on the property in the same manner as if purchasing a freehold property.
By instructing searches to be carried out, obtaining Land Registry title documents, inspecting the property on the ground and making thorough enquiries of the landlord, you will be best placed to fully appreciate any additional restrictions that may exist.
For example, a local authority search result will reveal if the property is a listed building or situated in a conservation area, the title documents may prohibit the use of the property for certain purposes, or an inspection of the property may reveal a physical obstruction to the planned use of the property.
All of these examples could potentially make the property unsuitable or certainly less desirable for the intended use and so it is essential to look not just at the terms of the lease but the property as a whole.
