The majority of businesses need premises to operate from, whether they be for offices, workshops, factories or storage facilities.
PLEASE NOTE: FOR CORONAVIRUS SPECIFIC GUIDANCE WE HAVE PRODUCED THE FOLLOWING BLOGS IN REGARDS TO COMMERCIAL LEASES/LANDLORD & TENANT ISSUES:
The Coronavirus Bill – what it means for landlords and tenants
Coronavirus – Do my obligations under a commercial lease still stand?
While some businesses own the premises they operate from, most occupy under a lease paying a market rent. But, there is more to a commercial lease than the payment of rent and the answers to the following commonly asked questions will give potential business tenants some useful guidance:-
1. Once I have signed the lease can I get out of it if my business suffers a downturn?
Leases are generally granted for a fixed period of years known as a term. The lease term can only be ended early by the tenant if, prior to entering the lease the landlord has agreed that the tenant has an option to do so, or, the landlord later agrees to release the tenant from the lease before the term has expired. If neither of these situations arise, and you cannot find an acceptable replacement tenant for the premises, you may well remain bound to pay the rent and comply with all other obligations until the end of the lease term, even if you have vacated the premises.
2. I know there will be rent to pay, but are there any other costs I may be responsible for under the lease?
If you are renting part of the landlord’s building such as an office block, you may also have a responsibility to contribute to the upkeep and maintenance of common parts of the whole building such as the roof and structural walls, or other things that are used in common with other occupiers of the landlord’s property, such as lifts or a reception area. This is often referred to as service charge. The tenant will also be responsible for the payment of the insurance premium for the premises to cover damage to the premises and also the loss of rent the landlord may suffer if the premises become unusable due to such damage.
There can be a cost if you want to transfer the lease, or sub-let part of the property to someone else, as you will usually need the landlord’s written permission, and the landlord can normally claim the cost of considering whether to agree to the transaction and also drafting and agreeing the form of the written permission. Finally, you will usually be responsible for the business rates, utilities and any other outgoings in relation to the premises.
3. If I find that there are repairs required to the premies, am I right to think the landlord will sort them out?
Most commercial landlords not only seek to avoid any responsibility to carry out repairs to the premises, but will actually seek to put the responsibility for putting the property into repair on the tenant’s shoulders. A tenant who agrees to a full repairing obligation can find himself with a repairing bill running into tens of thousands of pounds when the lease ends, despite the fact that the disrepair pre-dated the lease itself. A well advised tenant will try to limit his repairing responsibility to keeping it in no worse state than it was at the date of the lease. For this reason, it is highly recommended that an ingoing tenant obtains a survey to check and record the condition of the premises before they enter into a lease.
4. What happens if, after I have taken the lease, I discover there are problems relating to the premises that impact on my business?
The principle of “buyer beware” relates to a tenant taking a lease in the same way that it does to a purchaser buying a property, meaning that a tenant takes a property “warts and all” and they must satisfy themselves that it is suitable both physically and legally for the use they intend. The research into the property carried out by a good lawyer will reveal many things about the property, including whether the landlord actually has the power to grant the lease, any adverse rights that may affect it as well as any rights that benefit the property such as rights of way. Lawyers can carry out a range of enquiries and searches to discover such things as planning permissions affecting the land, whether the property is connected to the public highway, whether there is any risk that the premises may be on contaminated land, whether there is a risk of subsidence due to historic mining in the area, whether the property is connected to mains utilities and a host of other information.
It is common for tenants who have not been represented by solicitors to enter a lease without finding out any of this information. If a problem rears its head in such a case, say for instance the property does not have planning permission to use it for the tenant’s business, he will have no comeback against the landlord and the tenant will have to continue paying the rent despite the fact he may have a useless asset.
5. I’ve heard that a landlord can change the locks of my business premises if I am late paying the rent, is this true?
In short, yes. The powers of a commercial landlord to deal with non-payment of rent are far-reaching. Forfeiture is the procedure by which a landlord can terminate a lease and virtually all commercial leases will have a clause allowing the landlord to terminate the lease if the rent is unpaid for a specified number of days, usually somewhere between 14 -28. Unlike their residential brethren, commercial landlords do not need a court order to retake possession of leased property if their right to forfeit the lease has arisen because of late payment of rent. Landlords also have the right to send bailiffs in to seize the tenant’s goods and sell them if the rent is unpaid, but legislation will soon come into force to restrict this right.
The above answers cover some basic issues relating to commercial leases, but in reality only scratch the surface of what is a complicated topic. If you have any queries relating to commercial leases please comment on this article and I will try and answer them. I will also be posting further blogs on different aspects of commercial leases and commercial property in general and welcome and comments and contributions you may have.
when i pay my deposit, prior to signing my lease and i withdraw and i withdraw from the premises, am i entitled to get my deposit back ?
Is the landlord aloud to tell me to take off products from my takeaway because of competition
When my buyer commences his new lease am i obliged to stay for handover period?
Looking into buying a hair salon. There is a lease to pay and rent. Will i have to pay the lease upfront or can it be paid monthly with the rent. Never done this before so advice would be appreciated. Thankyou
My lease expired Dec 2017. I took my commercial landlord to court for opposing the renewal of my protected lease. 2 years later in the process, he came back and offered me to cancel the court case through a court consent order which I did. We agreed all terms apart from the rent. The term in the consent order is as follow “The rent will be determined by negotiation between the Landlord’s and Tenant’s surveyors in light of the old protected lease. If they are unable to reach agreement then the matter will be referred to an independent local surveyor to be appointed by both parties or to the President of the RICS, who will appoint a third surveyor, and whose decision will be final”.
Now my landlord wants the 2017 rent review although he is not legally challenging for the interim rent I told him he has opposed the renewal of the lease, so his right for the interim rent has been lost as Section 24(A)(3) Landlord & Tenant Act 1954 states that an application for interim rent must be made not more than 6 months after the termination of the “relevant tenancy”. My question is about the the 2017 rent review is it still operable? bearing in mind the court order does not specify a lease start date. Kind Regards
Can a landlord obligate tenant to maintain commercial insurance on a property even if you’ve done the walk through and turned in the keys 3weeks before end of lease? Last month’s rent has already been paid.
I have a business (cafe) in a Centre. We are responsible for the electrics within our space. Recently we suffered a forced closure due to the MAIN electrical system being over loaded. (Nothing to do with us)
The centre (our landlord) are claiming they are not liable for loss of trade and we aren’t not being paid the COST of which we suffered. Ie wages, loss stock, they have failed to show us the EIRC report on request. Are they liable? Is there anything we can do?
Should landlord issue invoices for my monthly rent? I’ve always been under impression that the initial contract stating monthly rent amount is enough to claim rent expenses but I have been recently advised I should actually be receiving an invoice from my landlord on monthly basis (I run non VAT limited company). Is this correct?
There was a recent fire in the Mill that I run my business out of. The fire wasn’t in my unit but has taken out the electricty for the entire building. This is going to take a good while to get fixed given the Coronovirus situation.
The landlord is expecting me to pay full rent during the period which the building is out of action citing the contract clause:
“We are not responsible for any interruptions in any of the services that are caused by events beyond our control or that are your fault.”
I have asked for the fire authorities report to challenge “events beyond our control” but we are currently still waiting for its completion.
Do I have any rights if it turns out that the fire was the fault of another careless tenant?
Surely I can’t be expected to pay full rent on an unusable unit for a seemingly endless period of time?
Is this even legal?
Thanks
Sean
My daughter in law has rented a tattoo studio and the landlord is letting himself in at night, the studio needs to be sterile at all times so is he allowed to do this. Furthermore there are signs that people have been sleeping in there overnight, what are her legal rights