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.
We recently had a change of ownership in our property we have leased for 4 years. The new landlords have released a memo stating rule changes that will greatly impact our ability to conduct our business. But in the original lease there is nothing written to follow these new rules
What can we do legally? We will suffer economic hardship if these rules are put into play. Thanks for any advise you can offer
Hi. We rent a building in Belfast.. a few moths back we fell behind in rent.. now it’s up to date.. but the building owner(not managing agent ) came and turned are heating off .. what is are rights? Can he do this?? Thanks in advance.
Hello. I have a lease and have become ill so unable to pay the rent, on my shop , what can I do. About this. I signed a lease with a different person and it has been sold on. I think I have a clause after 5 years, but I have no copy of the lease
What if u can’t continue paying the rent after u move out of the shop. What happens then?
Hi I am currently 3.5 years into a 5 year fixed commercial lease. I would like to leave the property now and settle the amount owed for the remaining 1.5 years. Please advise, would the amount owed include just the rent? or should it also include rates and maintenance costs.
Hi Emma,
Thank you for your query.
A commercial property lease usually continues until its end date unless you and your landlord have included a clause to end it earlier (otherwise known as a “break clause”). If you wish to cut a fixed-term commercial lease short, and you are able to do so, there should be no issue however you will need to look at the specific terms within the lease to check what process you will need to follow and/or quantify any remedy which you will need to make to your landlord.
If your lease only explicitly refers to your liability in respect of the rent, then your interpretation may be correct in settlement of the amount owed to your landlord. In order to provide you with any specific advice however we would need to review your lease and any other relevant documents in the first instance. Please let us know if this would interest you and we will be in touch.
Kind regards
Hi my partner had shop that was used as a cafe.i bought all the equipment in my name and I have the receipts to prove it.
However the landlord changed the locks because she was a month behind with rent which I am aware they can do by forfeit.
However they moved another tenant in while still asking my partner for the rent.
They also kept all the equipment that belonged to me and allowed the next tenant to take them.
Is what they are doing legal.
I have heard since they changed the locks that is them effectively terminating the lease but because they got another tenant in while asking for rent of my partner that they cant do that.
Also them holding items belonging to me is classed as theft is this correct
Thanks
Hi.
Thank you for the information above
I saw the house in a residential area and I contacted the agent and told him I was looking for the place to do the catering business. He drew me a lease which allowed the house to be used for both residential and business. He led me on by even giving me more business ideas that i could have done on the premises. Weeks down the line when my business was starting to run smoothly I got the visit from the municipality who were alerted by the community members who were against running of such a business on a residential zone. I told the agent that i was forced to close down and he ignored me. Now The municipality has increase the rates by up to 10 times the normal.
My question is, Who is liable to pay that bill because the agent has even increased the rent because he assumes that my business is in the state of doing well now.
Dear Carol,
Thank you for your comment.
I would need to see a copy of your lease and consider this fully before I can advise you on:
• The legality of the Agent giving you a commercial lease for residential premises;
• The legality of the Municipality in demanding an increased rate; and
• Where the liability for bill payments lies.
In order for me to be able to provide you with more robust advice, it would also be useful for me to have a brief chronology of events from you.
I would be happy to review your papers and provide you with more substantive advice, should you wish to discuss this, please do not hesitate to contact me by email at dulcimer.mclaughlin@harrison-drury.com or on 01772 258 321.
Many Thanks
Dulcimer
Hi need some advice, I recently enquires about leasing a commercial property and was informed to pay 900 pounds for vendors legal fees. I paid this and then since have decided I don’t want the property, I have not signed anything and they are declining my request to have my money refunded ? Is this allowed ?
Dear Michael
Thank you for your comment.
I would need to see a copy of your correspondence with the vendor and consider this fully before I can advise you on your rights to have the £900 refunded.
I would be happy to review your papers and provide you with more substantive advice, should you wish to discuss this, please do not hesitate to contact me by email at dulcimer.mclaughlin@harrison-drury.com or on 01772 258 321.
Many Thanks
Dulcimer McLaughlin
I have a business lease under the Landlord and Tenant Act 1954. The lease is for a small workshop (80 sq meters) with a pedestrian access and double doors with vehicular access. My landlord is in the process of selling the property to his daughter who has visited me and told me she is blocking the vehicular access and I will no longer be able to gain access via the double doors. My business is joinery with B1 permission. Without double door access I will not be able to accept long planks of timber or remove from my workshop jobs made that will not fir through a pedestrian door. What can I do?
Hi, we have a commercial tenant 0f 3 years with no lease agreement sharing our commercial site. they are 4 months behind in rent (20k) and show no signs of making any money to pay any. they are also using our electricity and not contributing.
can we change the locks or cut the electricity off to there part of the unit or can we have a electric meter installed for them so the debt is not just on us.
any suggestions welcome.
thanks.