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.
I have not got a copy of my shops rental agreement lease how can I obtain a copy of lease, could I obtain a copy from land registry. My shop is in northern ireland
My commercial landlord did not renew my 3 yr lease at end Mar 19. He said the solicitor was dragging his feet and then recently said he was told by solicitor that it may be better for him to provide a licence instead of a lease. I dont have security of tenure, I have asked for it but landlord says no. He now is offering me 1 yr lease from Oct 10th 19 to 2020, subject to changing over to a licence which I have not asked for, and also 6 months back rent, which he explicitly told me not to pay anything when my lease ran out, which he is now claiming as mesne profits.
I have requested a 3yr lease fro Oct 2020 but he wont respond to my concerns right now, but wants me to pay back rent today. Seems to me – once he gets what’s owed he will just have total control over me again?
I have recently moved into a local gov managed business unit space. It was marketed as a start-up centre for creative businesses. The opening was pushed back by months, setting me back in my business by months. Now I’ve been in 4 months and I still haven’t got the facilities promised in my studio which are essential to my practice. They also said we would have specialist business support which we have not. I’ve had 2 major water leaks in my studio which has hampered my progress. The rent rises in 6 monthly increments and they have said they will not extend the lowest increments period disputes the problems everyone has faced. Where do I stand on this does anyone know?
Dear Emma
Thank you for your comment.
I would need to see a copy of your lease and consider this fully before I could advise you on your rights and remedies in relation to the issues you have been having with your tenancy. I am unsure as to what issue in particular you would like advice on, it is for this reason that I would be grateful if you could provide me with some further information, as well as any specific queries you have. We are also of course able to review the lease and provide you with more general advice should you wish us to do so.
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
My building has been sold and my new landlord has not been in touch with any kind of information concerning where to pay my next quarter’s rent in spite of me getting touch several times.
I am due to leave the property in January by excercising my 3 year break clause but the terms state my rent must be up to date for this to happen. If I can’t pay the rent because I have no details, how can I do this and where do I stand?
Dear Lizzi
Thank you for your comment.
I would need to review your lease in order to be able to advise on how you could exercise the Break Clause contained in your lease with consideration of your issue of having no financial details to make rental payments.
I would be happy to examine 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
My landlord after 2 years wants to change my signage to forest green and white. My colors are hot pink, black, and white. Is that legal. My lease says I’m responsible for signage
Dear Renee
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 your Landlord’s rights to specify the type of signage that can be affixed upon your property, and to what extent your Landlord could enforce any rights which may exist under the lease.
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
After relief from forfeiture are the tenants liable to pay rent for the period when the landlord took back possession?
my landlord owes me money for electricity and heating oil … He says I am not within my rights to with hold the amount from my next months rent . Is this true ?
I took out a 3 year FRI lease on a commercial unit, and eversince, if there is a hard downpour, I get a river flowing through. Landlord states there was no issue prior, do I have any rights here?
Dear Ian
Thank you for your comment.
I would need to see a copy of your lease before I could advise on your rights and remedies in relation to the body of water flowing through your commercial unit.
I am sorry that I cannot be of more help. If you have any questions, or would like us to review your papers and provide more substantive advice, please do not hesitate to contact me by email at dulcimer.mclaughlin@harrison-drury.com or on 01772 258 321.
Many Thanks
I have a one year lease with a three month
break clause which comes to an end next month. The landlord is looking to sell to developer’s in the near future. For this reason he is not offering me a new lease. But he is still talking rent off me until he sells. With out the lease can I refuse to leave if he asks me to.
Dear Gary
Thank you for your comment.
I would need to see a copy of your lease before I can advise on your rights and remedies in relation to remaining in the property beyond the term of your lease.
I am sorry that I cannot be of more help. If you have any questions, or would like us to review your papers and provide more substantive advice, please do not hesitate to contact me by email at dulcimer.mclaughlin@harrison-drury.com or on 01772 258 321.
Many Thanks
i had a contract to rent a commercial property for three years. after the second year the landlord moved in a company next door to me that disrupted my business and forced me to lose money and close. am i still forced to pay until the end of the contract period?
Dear Andrew
Thank you for your comment.
I would need to see a copy of your contract before I can advise on your rights and remedies in relation to liability to pay rent until the end of the term of the contract.
I am sorry that I cannot be of more help. If you have any questions, or would like us to review your papers and provide more substantive advice, please do not hesitate to contact me by email at dulcimer.mclaughlin@harrison-drury.com or on 01772 258 321.
Many Thanks