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.
Hi Sue
If your exisiting lease was one sheet of paper, then it more than likely did not exclude the provisions of the Landlord and Tenant Act 1954 (the Act). This means that in order to create a new lease with standard commercial terms you will need to ternimate the existing lease by serving 6 months notice compliant with the Act and thereafter negotiating new terns if your tenant wants to remain in occupation.
The notice in question is a standard form and has to be served in a prescribed manner. Once the notice is served, the tenant will have the option to either renew their tenancy before the end of the notice or alternatively leave the premises and end the tenancy.
Give me a call if you need further help
hi
i have a tenant in commercial premises who i inherited when i purchased the freehold.
his previous lease is coming to an end and he is refusing to sign a new lease as it is a full repairing even though i have agreed to exclude the ongoing repair issues,and to pay for them as and when they are completed, this is a trading business and so the repairs can only be carried out at certain times to minimise disruption.unfortunatly his previous lease was a one piece sheet of paper which didnt amount to much and i require him to sign a standard law society lease, he is now saying he will vacate the premises taking everything including the floor with him,
where do we go from here?????????
sue
Planning law and landlord and tenant law are governed by different rules and regulations, but the effects of each overlap.
The local planning authority will designate certain zones for different types of use. However, that does not mean that a specific property within a zone cannot be used for a purpose which falls outside the use designated for the zone. What you have to look at is the planning use permitted for the individual property. You can get details of this from the local planning authority.
Even if the local planning authority has not permitted a specific use for the property, it will be lawful to continue a use for the property which has been carried on continuously for the past 10 years.
With regard to your present situation, landlords and tenants are relatively free to come to a deal relating to the terms of leases, which could include a commercial lease being terminated where a residential lease also comes to an end. It sounds to me that you don’t want such a provision, so what you need to assess is what is the strength of your bargaining position? If you have a written lease of the barn at present that would need to be assessed, if not then you do have rights under the Landlord and Tenant Act 1954 which provide security of occupation for business tenants.
If you would like some further help on this please call the office as we will need some further details and documentation before we could avdise further.
Can a Landlord have a commercial lease for a property that is not zoned commerical (i.e. renting a barn for dog training). Also is it legal to make a commercial lease dependant on a Residential lease? In our case…we rent the barn on a property for the purposes of a dog club and he wants us to sign a commercial lease that he has tied into the house lease on the same property. His clause is that if the tenants move out of the house on the property, our lease also comes to an end. The property is not zoned commercial.
Hi Katie
The starting point in any dispute of this nature is to look at the terms of the lease, and in order to advise you accurately I would need to see the lease. However, there are some general points which may be of use to you.
If, as you say, the right to use the telephone line came as part of the package when you took the lease of the premises, his actions in cutting off this line will be unlawful.
The lease should dictate the intervals for payment of rent. If it states that rent is paid monthly, and you have paid the rent due monthly then you have not breached the lease. A landlord who changes the locks when his right to do so has not arisen is breach of his obligations under the lease and will be responsible for loss caused to your business, and you can also ask the court for an injunction to allow you back into the premises.
If the landlord has taken a calculated step to take your business from you unlawfully, in the hope that you would not mount a legal challenge, a court would view this very dimly.
Even if there is some rent due, and the landlord has forfeited the lease lawfully, you still have the right to apply for what is known as relief from forfeiture. This is done by paying all rent due, and also the reasonable costs of the landlord and requesting the possession of the property back from the landlord. If he refuses, you can make an application to court who will order that possession is given back to you, if the application is made sufficiently promptly.
If you want some specific advice on your situation please give the office a call, and we can hopefully help you out.
Hi there,
I am the owner of a sandwich bar who has recently been evicted from her premises through the lock changing method in which you have just described.
Basically, I have had a nightmare business relationship with my landlord for the past 8 months and eventually issued civil proceedings against him a few weeks ago under the grounds of harassment and various breaches of the lease, (including cutting off the telephone line which I bought with the businesses.)
When I originally bought the business we had agreed that I should pay my rent on a monthly basis, however when our business relationship started to faulter my landlord ordered that I pay the rent termly, which I agreed only to keep the peace.
However, when I started court proceedings in the past month I gave my landlord notice that I would revert back to paying monthly as I believed this to be the easiest solution whilst legal proceedings were taking place.
The next thing I know, I try to open my sandwich bar one morning and the locks have been changed and a bailiff notice in the window for outstanding rent arrears. To the best of my knowledge I am not in rent arrears because I have payed up to Febuary 14th 2009, and intended to make another monthly payment when it was due.
To make matters worse, a few days later there is a notice in my shop window stating that the business will re-open the following week. My landlord has evicted me out of my premises and now plans to run my business himself. Surely this is not legal?
I would really appreciate some advice as I really do not know where I stand in this situation and feel helpless.
Katie.
Hi Deborah
There are many distinctions between a lease of commercial property and one of residential property, one of which is the steps a landlord has to take before they forfeit or terminate a lease.
Commercial leases usually allow the landlord to forfeit the lease in the following circumstances:-
1. if rent remains unpaid over a specified number of days after it fell due;
2. where there has been a breach of any of the tenant’s other obligations in the lease;
3. if the tenant has become insolvent.
If a commercial landlord is forfeiting for non-payment of rent, they do not need to give notice first. If the landlord forfeits for any other reason, they must first give written notice to the tenant and a failure to do so will make the forfeiture unlawful. In either case a commercial landlord does not have to go to court, but this is an option available to them which landlords often choose if there is likely to be a dispute as to whether the tenant is in breach of its obligations under the lease.
If a commercial landlord forfeits for arrears of rent, they will often change the locks immediately. If they go to court, it will take at least 6 weeks to get a court order.
The landlord of residential premises is much more restricted when it comes to terminating the lease and cannot try and evict a tenant without a court order. It will generally take at least 8 weeks for a residential landlord to get a court order for possession.
I hope this helps.
hi does a landlord need to give notice to a leasee if he is going to foreclose on the lease and does it need to go to court first i would like to know how long does the process take thanks deborah