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.
Denis
Many thanks for your last two posts. Landlord and Tenant law is a specialised area and not all solicitors will be versed in its complexities.
However, the law is very clear that once a landlord has terminated a lease by forfeiture then the liability for future rent ceases.
If you would like me to take on your case, please give me a call at our Preston office, the number is at the top of the page.
Regards
John
hi again john
Just spoke to a solicitor here and he’s either oblivious to what you have advised me on or just plain ignorant. He tells me that even though the landlord have changed the locks he can still take me to court or can come up with different excuses to keep me on the lease and get more money for the services he hired, whether its bailiffs fee or surveyors… is it possible to confirm this with you? Does he have any valid points? i have done some research after your advise and found what you have said was repeated by others that when the landlord changes the locks it terminates the lease.. so can you clarify this for me please? i thank you in advance for your help.
denis
thanks for ur advise john.
most of the solicitors that i have asked gave me negative replys about this situation. if you can, can you please point me to which laws that could back me up or use if the other party fails to acknowledge the points u raised? i have stopped going to my solicitor and id like to ask you if needed, can i get in touch with you regarding this matter directly and for representation? and what is the key legalese words that i should be looking for on the lease..
Thanks again
Denis
Denis
If the landlord had changed the locks to your shop as an act of re-entry in accordance with his right to forfeit then this will have terminated the lease and the responsibility to pay future rent. However, you will be liable for any rent payments that fell due up to the date of forfeiture, even if you were paying in advance for a month and the landlord forfeited on the second day of that month.
You are entitled to your goods back out of the shop, and the landlord must allow you reasonable access to do this.
If the deposit was taken purely to guard against arrears of rent then you will be entitled to it back if all arrears have been paid. However, sometimes a deposit also covers the cost of carrying out repairs that the tenant was responsible for, if this is the case he may try and withhold it for this purpose. There should be some mention of the deposit in the lease or a seperate rent deposit deed which governs the repayment of the deposit.
Also, you should notify the local authority and any utility suppliers that you no longer occupy the property and possession has been retaken by the landlord.
Regards
John
Hi John
I have a newsagents/off licence which ive been running for a little over 5 years. i never missed a payment of rent up to last month where im in arrears for 1months rent. i have spoken to my landlord about the difficulties that im facing but it seems it goes in one ear and comes out of the other without really registering. The lease has another 7-8years left and its on my sisters name which she has nothing to do with for the last 3years. when she signed the lease we had to give £6000 deposit. Last week without a warning and knowing full well of the circumstances he sent a bailiff to seize the goods in my shop. we paid half of the amount owed for 1months rent arrears ( which didnt really go to him as the bailiffs charge was about £500). i have spoken to him on the day and he agreed to pay half of the bailiff fee. few days after i decided to close the shop down temporary for a week untill i had raised the money to pay him, with his full knowledge of my action. and today i recieve a phone call from one of my neigbours to say that the landlord was changing the locks without any warning. I have read ur response on another post above and u advised and i quote ”If the landlord has instructed bailiffs to enter the premises you tenanted, and they have changed the locks, then this will be an act of forfeiture and any rent that falls due after this date cannot be claimed by the landlord. Therefore, if you are up to date on all payments that fell due before the forfeiture you do not need to make any further payments of rent.” does this mean that if i decide to close the business down will i not be liable for the future rent? and if i clear the arrears that i owe, will i be able to get my deposit back? i still have stock and personal belongings in the property , will i be able to get them back? thanks in advance for your advice and help.
denis
Dear Sir,
Thank you for your advice. I am very grateful for your kind assistance.
I will contact you directly to discuss the options of you taking on this case for me.
Warm Regards,
Paul
Paul
This is an awful state of affairs, and I am sorry to hear of your injuries.
The first thing to consider is whether or not the landlord’s actions in forfeiting the lease are lawful. Firstly, there must be a forfeiture clause within the lease, which will be there if the lease was professionally drafted. The lease will normally state that if rent remains unpaid for in excess of a specified number of days the landlord may enter the premises and terminate the lease.
Whilst you have a complaint against the landlord this does not necessarily allow you to withhold rent. Many rent clauses will state that the rent is to be paid without deduction or set-off, in which case the tenant must pay the rent and raise any complaint with the landlord separately.
In brief if the lease states that you were obliged to pay the rent without set-off or deduction, and it contained a forfeiture clause which the landlord has complied with his actions will be lawful.
If you want to get back into occupation of the property, you will need to pay the arrears of rent and the cost of the forfeiture to the landlord, who then has to allow you back into the property if he has not re-let it.
With regard to your complaint, you are right to point out that a tenant has a right to quiet enjoyment of the tenanted premises. If the landlord or anyone acting under their authority, interferes with this right then the landlord will be in breach of this provision. If the landlord is aware that the upstairs tenant has committed an assault againt you in the shop previously, there is a good argument that he is in breach of the covenant for quiet enjoyment.
However, this is the type if case that cannot be advised upon properly without a full consideration of the facts. If you would like us to take this case on for you, please get in touch.
Regards
John
Hello sir,
I have resided at my current premises for the past 10 years and I have 6 years remaining on the lease. Over that period of time my Landlord has been a nightmare. In a nutshell, I was stabbed inm an unprovoked attack by a man with mental problems who occupies the flat directly above my shop whilst I was in business. The Landlord who owns the residential flat which the man occupies also owns my commercial unit. I have been in hospital for sometime since the incident and have been paying my rent over this period.
However, I and have recently left Hospital and I informed the Landlord that I wish to return to the shop. The man who attacked, has served time in prison and to my shock due to him receiving social benefits whilst in prison, the Landlord had allowed him to come back to the flat.
I have recently requested that the landlord take steps to remove the man due to be be unable to have the “peaceful quiet enjoyment of my premises whilst he is living above my shop” I have witheld one quarter’s rent because I need to know if the man will be removed and the landlord has just this week without notice forfeited the lease on the shop. He has changed the locks on the door, and put a notice in the window. Can you offer any advice?
i bought a chip shop on leasehold in 2006 and now the buisness is not doing so well and i am struggling paying my bills and the rent is also high. i have tried selling the lease but no one wants it because the rent is so high and my landlord wont sell me the freehold until the agreement finshes 2016 help me out
Hello John,
Bailiff is claiming this is not an illegal eviction. Where there is no signed lease he says the right of re-entry exists under common law and the Rent Act 1988. It is also claimed that the landlord is entitled to his rent under Human Rights Act.
Can you give me any more info.
(I emailed you colleague before I realised I could contact you again. Sorry)
Liz