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.
thanks for replying.its not in the lease but my solicitor is saying its common law..if i leave the equipment in order for the lanlord to relet easier, will i still owe her money or will this be taken into account?
Hi Judy
Unless the lease says otherwise a Landlord has no right to deprive a tenant of their goods after the lease has terminated even if it is ended by forfeiture for non-payment of rent.
Read your lease carefully, if it does not give the landlord the right to retain your possessions after the lease has terminated then the landlord is acting unlawfully and you have the right to apply to court for an order to recover your goods.
Best of luck
John
Hi our lanlord changed the locks on our restaurant 21 days after the rent was due.I got in touch saying that i was going to pick up my stuff 2weeks later.she is now saying I cant.Apart from over £30’000.worth of equipment I also have lots of personal items and stock/diystff/ utensils etc.she also got a letting agent 2 wks ago and they are showing people round and also harrassing upstairs tenants to leave.Help??
John, Thanks for your views.Greatly appreciated.
Hi David
The extent of the tenant’s obligation to contribute to the cost of communal expenses will depend upon the wording of each individual lease. Therefore, before anyone can provide you with advice on your particular situation, a full consideration of your lease will be necessary.
Having said that, there are some general principles that have arisen from the case law concerning repairs in a landlord and tenant relationship. One of those is that where it is more cost effective to replace an item that has fallen into disrepair instead of carring out the repair, the person obliged to carry out the repair can instead renew that item. Therefore, if your landlord is obliged to repair common items this could extend to replaing such itmes if they are beyond economic repair.
If you are facing a potential liability of thousands of pounds I would definitely recomend that you get professional advice to look at the lease and the service charge claim being made by the landlord, as in some circumstances a tenant can be liable for the renewal of common items, but each case will turn on its own facts.
Regards
John
Hi there. If a Landlord has an obligation to provide heating, lifts and boilers to a multi let building but the tenants lease only provides for a contribution to running costs and not renewal of said items can the Landlord recover renewal costs?
Regards.
David
Hi John
Many thanks for your valuable advice.
Regards
Derek
Hi Derek
I will answer your queries in reverse order. Renting commercial property does not give rise to any form of statutory or implied right to purchase the property you occupy. This differs from certain forms of residential occupancy.
In relation to your occupation of the property, the first question to ask is whether your 2002/2003 lease was contracted out of the Landlord and Tenant Act 1954 (the Act)? If it was not then it is highly probable that you now have a tenancy that is protected by the provisions of that Act.
The protection given provides that your tenancy cannot be terminated by anything less than 6 months written notice given in a prescribed form. Once this notice is given, you have the right to request a new tenancy and the landlord can only lawfully object on certain limited grounds which include either default during your occupation (arrears of rent etc) or that the landlord wishes to redevelop or occupy himself. The rules concerning renewal are fairly complex. My advice to you is to sit tight at your existing rent as long as you can, the landlord cannot unilaterally raise the rent without following the termination procedure. If he does start with this procedure or seeks to alter your terms of occupation, then take some specialist advice.
We will be more than happy to assist should the need arise.
Regards
John
Hi
In 2000 I rented a commercial property on a one year lease, this was not renewed in 2001. In 2002 I signed another 12 month which expired in 2003. Since then the landlord has not offered me a new lease and I have not asked for one.
For almost 7 years I have continued to pay the rent (which has remained unchamged since I first occupied the premises) and am wondering what if any rights I may have accrued for example the secure tenancy, right of tenure etc.
I would also be grateful for any information on any rights I may have should I wish to buy the property.
Hi Maria
The forfeiture clause in a lease usually states that if any rent is in arrears the landlord can re-enter the premises and take possession. Therefore, if any rent was the requisite number of days late (you will need to check the lease in this respect) he can lawfully change the locks. You will need to read the forfeiture clause carefully or take it to a solicitor for some specific advice.
In relation to your possessions, unless the lease says otherwise, the landlord cannot take your possessions after the lease has ended and has an obligation to look after them, and make them available for you to collect. Some leases state that if the lease ends with money owing to the landlord, he can sell them and take what is owed from the proceeds. Again, I advise you read the lease carefully, if there is nothing in there allowing the landlord to deal with your belongings then you may have the option of pursuing a claim through the small claims section of the county court.
Regards
John