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.
Hello
I lease a shop, with a view to sub letting. The shop is empty and I am not trading from it, but as I am paying rent for it can I still claim small business rates relief.
Do I have to be ‘trading’ or can the unit be used for storage allowing me to claim small business rates?
Thanks
What’s happened if a commercial Leaseholder (Tenant) refuse to pay extra, when rent Review has been added to rent?
Thanks
V
My landlord has never given me a copy of the lease I signed , are many issues with the buisness is the contract null and void if they haven’t give me a copy, this was 6 months ago.
Hi we rent a commercial property and due to a fire to the building behind us building control and the council have sealed of the entire block with no access to the property do we still need to pay rent?
Hi
I have been in my commercial property for 10 years and the lease was only for 1 year and has not been renewed since. The landlord is now asking for spare keys and our alarm code. I have refused but he will not let it go. Does he have a right to the keys and alarm code?
Hi Tracy,
Thank you for your comment on our blog.
With respect to your landlord’s ability to request the spare key and alarm code, this will depend on what is stipulated within the lease you entered into with your landlord and whether the terms of this lease are still applicable even though the term of the lease expired a number of years ago.
If it found that the lease has expired and there are no express terms stipulating your landlord’s rights and remedies, one option might be to enter into negotiations in order to formalise a new written lease, which would enable you to clearly define your rights and stipulate what the Landlord can and cannot do.
In the first instance however, we would need to have a look at your lease and any further correspondence which you may have received in relation to this matter, so that we can provide you with some initial advice on your legal position. If you would like us to carry out such works, please contact me by email at dulcimer.mclaughlin@harrison-drury.com, or call on 01772 428193.
Kind regards,
Dulcimer
We have recently rented commercial space for a restaurant. The location was advertised as turn key. The location was previously a restaurant. We went to apply for our certificate of use and when following up apparently their is and has been no permit for outbuildings and there has been no permit issued for hood system. Believe it or not we ran into this same problem with the location we are currently in but the landlord stepped up and took care of what was needed so that we could open. My question is should a landlord advertise as turn key if a place isn’t up to code on permits to run as a restaurant? Should we be responsible for all these added costs to get a plan and permits?
I have rented my property of my landlord for 3 years and in that time we have had a electric problem so finely he as had a electrtion in or said it needs an up gread cost of 4 thousands pounds he is not willing to do this and as ask me to leave I ran a small cafe and this would be very costly for me to do this and I wood lost my customer base I have paid my landlord directly for my my gas and electric I dont get proper bill just a hand written one and now my lease as run out can he do this to me kind regards pehill
Hi Phil,
Thank you for your comment on our blog, our Property Litigation team regularly deal with landlord and tenant disputes and would be happy to assist you with this matter. To provide you with more clarity in this regard we would need to review your lease agreement, so as to identify the repair and dilapidations covenants between your landlord and yourself.
In the first instance, we would need a few more details from yourself so as to provide you with a costs estimate for our formative advice. If this is something which you are interested in, please provide your mobile number so that we may place a call with you or, if you are more comfortable doing so, call our office on 01772 258 321 and ask to speak to either myself or my colleague Chloe.
Kind regards
Dulcimer
I had a commercial lease and fell behind on rent by 2 months. I had given a rent deposit for 6 months The landlord changed the locks and forfeited the lease. Do I lose the whole 6 months deposit or just the 2 months I was behind on rent? Thanks
Hi Matt
Thank you for your comment on our blog.
We have just sent you an email regarding our thoughts, please let us know if you have not received this.
Kind regards
Dulcimer
We have a commercial landlord that is doing nothing but talking to people in a derogatory manner about us and affecting the trade ! Only yesterday some new customers came in who knew more about us than we do because of the landlord slagging us off to them saying we dont fit in and wont last much longer etc, what do we do about that !? Being forced out by our own landlord !
I am renting a small cafe I have been here 3 years the first year we had problems with our electric items blowing up all the time landlord said he would put it right but he is not a electrtion now he is saying he carnt afford to put it right and as ask me to leave I owe him no money for rent and I have to pay electric bill to him and I owe him nothing iam all up to date can he do this and have I got rights