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.
Can you tell me if a landlord has a duty of care when chasing for rent payments on a commercial premises. I am the leasee but had an effective assignment and the landlord has never contacted me and allowed arrears to build up and is now demanding that I pay them, years later.
I have just signe a commercial lease this morning and paid 3 month upfront and 1500 good will i have cahnged my mind can i cancel and get my money back its not been 24hrs yet
I have a commercial lease we have been in 6 years , when we first came in we found that there were no earthing andthe fuse boxes were past date, the landlord told us to shut up orget out, we paid to havethis work done as our agent said they woul refund us, they never have. we have 2 flat roofs , the lower one was leaking and we told the landlord who ignored our emails, we had it fixed they refused to pay our bill, the landlord bought land behind our shops and tarmaced it asking for us to pay part which was £7000 we fought this , they ignored letters from our solicitor but i fought it till eventually they accept this as nothing to do with our shops , i now have the top roof leaking and the inside ceiling is coming down they have ignored my emails again, and wont come to repair it, the whole building needs dealing with,
I pay service charges and buildings insurance to the landlord, but we are not getting any thing from them, they have never been here in 6 years , if the roof comes in it will damage my bathroom displays .
My landlord wants to replace a flat roof that is not leaking or in disrepair.
Is this allowed as the lease states I am responsible for a third of the cost.
I am renting a commercial premises in central west nsw .I have been here for 11 years and my landlord is making me pay business insurance. I am not on a lease i have told them i reduse to sign a lease as im not paying the building insurance as it is not my shop. I pay the water rates council rates rent and my own content insurance. I have spoke to fair trading and they have told me that its not my duty to pay building insurance as i dont own the building. I have been approached by my landlord and they have tpold me if i dont agree to the lease i have six weeks to get out. I have told then to put the rent up to cover the insurance and they wont do that. I have the smallest shed and pay the most rent and they make me pay $100 a week cash for another part of the shed that is a part of my rental shed. All the repairs that have been done since i have been here i have to pay half. Am i entitled to pay for my own building insurance do i have a choice
Hi I’m desperate for some free legal advise as I feel totally backed into a corner!
I have had a lease with my landlord for three years he unfortunately passed away and his wife took it on as a new landlady I then signed for another three years one month after that she started to be difficult and unapproachable this has gone on for sometime over the last 12 months or more
She has now decided not to renew my lease in 12 months time, I’ve known about this for the last 3 months! In her opinion she has given me loads of notice as she puts “ to continue my brand”
Else where!
I’m absolutely heart broken I have had my tea room and worked so hard to build it up, I am making it a successful business which is hard to do this day and age as a small high street business
My health has and continues to suffer I have depression and other medications as just before I went into the venture I had battled cancer! Part of the reason I started it, a lot my customers have become friends and I feel part of a community.
I’m hoping someone will read this and be able to advise me, the landlady also has a clause and holding deposit of £2500 that says I need to return the premises to how it was when I started although this is mainly cosmetic and fittings, I feel she will find a reason to keep this money, she is so unapproachable and tends to communicate via recorders delivery letters.
I haven’t the energy to stand up to this lady when I don’t know legally when I stand, I’m very desperate as I feel it’s all been for nothing but an experience. I’m currently at home with my 83 year old mom trying to hold it together on my behalf. Can someone please help?
Susan
I have a residential lease unto October 2020 but the commercial business thats attached to us , whats to use our yard for parking so he can have parking spot.. for himself …
Just recently he walk on our yard , and left a 10 liters of petrol and left the sliding gate open
We had very hot and I mean hot weather in nsw in last week , we was asked to move the container . He said ‘ No “.
We asked the real estate to intern but this took a week finally container last Friday…but i said “. If this not moved i will the police by the end of the day.
This person only wants free parking
I have a commercial shop that I am renting out to my daughter and her business partner. I had a 1 yr tenancy agreement written up but they never got round to signing it even after countless attempts of asking them to. They have been in 4 mths and have paid up front for 6 mths so not late in paying. Unfortunately their partnership has broken down and I am worried about my property as I have no deposit and my daughters business partner is acting in a very ruthless way towards my daughter. Can I terminate this agreement as it is less than 6 mths and nothing has been signed.
Thank you
We are a cafe Tennant within a building and for 3 days we have had to close as we have no electricity. This is an internal building fault and nothing to do with us. We have lost 3 trading days, where do we stand with compensation or can we withhold months rent to cover?
I had commericial lease of 5 years on a trade show sight paying after every 6 months before the show. I paid the landlord for 4 years and due to decline in business was unable to pay the last 2 shows. Landlord locked my showroom and sold all of my merchandise that was worth the rent I owed. He immediately rented my showroom to someone else. He gave my case to a collection agency who is now calling me everyday to pay the full amount due. Since they sold the merchandise, am I liable to pay the amount to collection agency. My business is not doing good and I can’t afford to pay or hire a lawyer. What can I do in this situation.