Having a professionally drafted lease is vital for any commercial landlord if costly mistakes and omissions are to be avoided.
All too often we come across cases where poorly drafted leases come back to bite the landlord when a dispute arises further down the line. Here are five of the most common errors made with commercial property leases.
1. Rent review clause
Something that should be in all long term commercial property leases is the rent review clause. Without it, a landlord is likely to get tied into a long-term lease without the ability to periodically increase rent to take account of inflation and other market forces. Again this must be properly worded to ensure it is enforceable and that the landlord does not make a loss on a property over a period of many years.
2. Repair and maintenance obligations
Another common dispute that arises relates to who is responsible for maintaining and repairing the property. As the tenant will have exclusive possession and use of either the whole of a property, or a specific part of it, the landlord will want the tenant to keep it in good repair and return it in repair at the end of the lease. However, if the lease does not explain this in the correct language it can lead to a lengthy and expensive court claim while the property continues to deteriorate in condition.
If tenants fail to pay the rent or breach other obligations, commercial landlords are able to evict them without having to get a court order for possession of the property. However, the landlord’s right to forfeit should be expressly set out in the lease document. If this is not dealt with in the lease, it could result in expensive court proceedings while the landlord attempts to get the tenant out.
4. Security of tenure
Generally speaking, property law allows for a tenant to remain in the property and request a new lease once the old lease has come to an end. Of course, the landlord can still seek to avoid granting a new lease, but only on limited grounds by following a formal notice procedure which the tenant can object to. Again, this can result in lengthy proceedings while the court decides who is entitled to possession of the property. This can all be avoided at the outset if the landlord states that such security of tenure is not to be a condition of the lease. This involves a formal procedure which many landlords do not know how to carry out correctly without legal advice.
5. Legal fees and other costs
To protect against incurring unnecessary or unwarranted costs, commercial landlords are able to have it written into the lease that the tenant has to cover their legal and other costs on any consents or variations to the lease. A landlord can also stipulate that any bailiff’s fees can be recovered from the tenant if there’s an issue with rent arrears or the need for an eviction. However, a landlord is only entitled to these costs if the lease expressly provides for this. Again the wording must be watertight to enable costs to be recovered.
It is all too easy for property disputes to arise through poorly-drafted or missing clauses within the written lease. Landlords should always ensure that proper legal advice is sought before entering into any lease.
For more advice on commercial property leases, or any other property law matter, please contact Owen McKenna on 01772 258321 or Owen.McKenna@harrison-drury.com