Leasing a commercial property can be a big step for a growing business. However, if you do not obtain legal advice from an experienced solicitor, you could be tied into a lease which does not suit your needs, and which could be financially detrimental in the future.

A commercial lease generally refers to a written agreement between a landlord (the property owner) and a business tenant. It sets out the provisions that will govern the relationship between the two parties. It is important that the terms of such leases are discussed and agreed prior to signing the lease. Your solicitor will be able to discuss the specific clauses in your lease and negotiate on your behalf. Simple words are encased in case law and can have a different meaning than what you automatically presume. A clause which looks fine to you on first read, could be incredibly burdensome in practice.

The key things that your solicitor will look out for when acting for you as a tenant are: –

• Freehold Title Investigation – It is important that the title to the property is investigated before you take a lease of the property. We will check that the Landlord has the right to lease the property to you. We will also check if any consents are needed from third parties such as mortgagors and management companies. We will also check that there are no current leases already in place.
• Rent – We will check the amount of rent payable and the dates it should be paid. This is usually paid quarterly in advance. If you have agreed a rent review, we will explain how it works and check that it is not too onerous.
• Break Clause – A break date allows either party (or just one party) to end the lease on a certain date. There are usually provisions to this, and we will explain how the lease will be successfully broken. If you do not follow the correct procedure, you will not be able to break the lease.
• Insurance – Usually, the landlord insures the property and recovers the cost of this from you. It is very important that the insurance clauses are read and considered in detail. If the property is damaged and is unfit for occupation you could end up still being liable to pay the annual rent.
• Repair and Decoration – We will check what your repairing and decorating obligations are in the lease. Again, it is very important that this clause is read and considered in detail. You could end up taking a lease of a dilapidated property but having to give it back in a fully repaired state. A schedule of condition can be used to evidence the state of the property at the start of the term and could be negotiated into the lease to prevent this.
• Use – You must check that the permitted use in the lease allows you to carry out your business. Planning permission should also be checked. We will check that your use of the premises is not restricted under the lease or any statutory restrictions.
• Service Charge – The service charge will allow the landlord of a multi-occupied property to carry out maintenance and other works on shared areas of the property and recover the costs of doing so from the tenants. The landlord will agree to provide and undertake services and you will be expected to pay a ‘fair and reasonable’ proportion of such costs. These costs must be checked before you enter the lease.
• Forfeiture – This clause will give the landlord the right to terminate the lease on the occurrence of breaches of covenant by you. These are usually for non-payment of rent, breach of tenant’s covenants and the act of insolvency or bankruptcy of the tenant. We will explain this clause to you and make sure you know what your obligations are under it.
• Landlord and Tenant Act 1954 – A lease for a term of 6 months or more can be excluded from the security of tenure provisions in the Landlord and Tenant Act 1954. Security of tenure gives to the tenant of a commercial lease the automatic right to request a new lease from the Landlord and/or the court. A landlord can only bring your lease to an end if certain criteria are met. There is an option to contract out of the Landlord and Tenant Act 1954. At the end of the term, (unless a renewal lease is agreed), the lease will come to an end. This is a very brief overview of the provisions. If you are being offered a lease which is contracted out of the Landlord and Tenant Act 1954 you should take specialist advice from a solicitor.

How can we help? 

The Property team at RJS solicitors are always available to assist you with your lease transaction. We are able to review your lease and explain the key terms to you. We are also able to negotiate on your behalf. We will also deal with any Land Registry and HMRC requirements. If you would like to discuss your requirements, please contact us today.