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Freqently asked questions about leases

Landlords

1.   I have recently acquired a commercial property and am keen to get a tenant in. How quickly can this happen and what should I include in the lease?

Once you have found a tenant, we will advise you on the most appropriate terms to include in your lease.  It's worth considering a number of factors including;

  1. Does the financial strength of your tenant justify asking for a rental deposit or guarantor?
  2. Is your tenant going to be carrying out alterations to the property? If so, we will ensure these are properly documented.
  3. Who will be liable for the repair of the property? Normally you would expect the tenant to take on full liability for repairs but this will depend on the original condition of the property.
  4. What is the tenant’s proposed use of the property? Does this comply with the planning permission for the property?

2.   How difficult is it to change the use of a commercial property?

Our commercial property lawyers are experienced in advising clients on how best to go about applications for change of use. We work closely with our clients'  specialist consultants, the local authority and use many years of local property knowledge to maximise your chance of success.

3.   I am buying a development of commercial units with several existing tenants - can the terms of their leases be changed?

You cannot unilaterally change the terms of any existing leases but it is always possible to try to negotiate changes with the tenants.  Bear in mind that tenants are unlikely to agree to accept changes to their lease which are to their disadvantage unless you can offer them some benefit in return.

4.   What additional costs are there when purchasing a commercial property?

In addition to the legal fees, you should also budget for SDLT (Stamp Duty Land Tax) and Land Registry fees, together with the fees for any surveyors that you appoint to provide advice on the condition of the building. In most cases they can give you an estimate of costs so that you know where you stand.

5.   Is VAT payable on commercial property?

Commercial properties are exempt from VAT but the owner has an option to elect to charge VAT on any supplies made (including renting or selling).  As part of our due diligence we will investigate the VAT position and advise accordingly.

6.   My tenant is selling the lease - do I have any say in the type of business he sells it to?

Most leases oblige the tenant to obtain the landlord’s consent before selling the lease.  You normally cannot unreasonably withhold consent to a sale of the lease but you are entitled to enquire as to the proposed use of the new tenant and their covenant strength (i.e ability to pay rent and perform obligations under the lease). Most leases also contain restrictions on the type of use to which the property can be put.

7.   I have invested in a mixed use development - do the leases on each unit have to be the same or can I vary them depending on the business that takes it on?

Normally a landlord of a mixed use development can negotiate the terms of each lease individually and there is no requirement for them to be the same.  A landlord will need to ensure that there is sufficient consistency across all of the leases so that, for example, the landlord can recover all of the service charge from their tenants.

Tenants

1.   I’m looking to take on a lease - what are the main things I should ask the agent about?

In addition to the level of rent, you should in particular enquire as to the level of service charges which are payable.  These can sometimes be as much as half the level of rent, so this is an additional expense which you will need to budget for.  You may also want to try and negotiate an initial rent free period to cover any fitting out that you will be carrying out to the property.

2.   I have heard of leases that expect the tenant to cover all maintenance costs - can I negotiate with the landlord about these?

It’s always open to any prospective tenant to negotiate terms such as this before taking out a new lease.  If the property is not in a good state of repair then you should request that your repairing obligations are limited. If you are concerned about the condition of the property, you should always instruct a building surveyor to provide a survey.

3.   There are some repairs needed on the building of the property I rent - but they were there when I took on the lease - surely the landlord should be responsible?

It very much depends upon what it says in the relevant clause of the lease. It may be that your repairing obligations are limited in some way, but if not, then you will generally be obliged to bring the property up to a good state of repair even if it was in a poor state of repair when you took it over. We will advise on your repairing liabilities before you take on the lease.

4.   What is a break clause and do I need one in my lease?

A break clause allows either or both parities to bring the lease to an end earlier than the lease expiry date.  Usually a period of notice must be given to exercise the break (typically 6 months ) and sometimes a tenant exercising a break option will have to pay a penalty for doing so. Any new business taking on a lease should consider negotiating a break option with the landlord to provide flexibility to get out of the lease obligations earlier if the new business does not work out as anticipated.

5.   I’ve seen a restaurant premises that would be ideal for my retail business but I've been told that I need to change the use. What does this involve?

In addition to any planning obligations, for example, for change of use, you will need to consider whether the existing lease contains restrictions preventing the property being used for anything other than a restaurant. If there is such a restriction, you will need to obtain the consent of the landlord to change the use.  We would deal with this as part of the acquisition process when you acquire the lease.

6.   Can I alter the property I'm leasing?

Most leases contain restrictions on what alterations a tenant can carry out. Some minor alterations may be permitted, but structural and / or external alterations are normally either prohibited or permitted only with the consent of the landlord.  We can advise you on what alterations you can and can’t do under your lease.

Call us now on 0117 926 4121 or make a free online enquiry for help with all your lease needs.