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.
3. Forfeiture
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 Harrison Drury on 01772 258321.
In a full repairing and insuring lease, whose responsibility is the repair of an ‘inherent fault’. Guttering and downpipes not coping with the rain (causing damage to a wooden door lintel and a wooden frame window of a neighbour)in an old listed building. Also (sorry!) in assignment, does ‘the remedying of any subsisting material breach of any of the tenant’s covenants contained in lease prior to and at the date’ mean anything, is it enforceable ?.
Many thanks
Really useful blog – thanks ! Wanted to check on something however. We have a periodic tenancy with no written agreement or lease and have been there for almost 25 years. The landlord increased the rent by 100% 3 years ago and promised to undertake repairs. No repairs have been made and now he has written to me telling me that the rent will increase by 30% with immediate effect. Am I bound to accept this as I have no written agreement and if I dont can he give me notice to quit ? I am unclear as to what would happen if he served notice and I then applied for a new tenancy – would this be under new conditions so sort of defeating the point of just giving him the rent increase from the off ? Thanks
Steven
The ability to receive a temporary reduction in rent will largely depend on whether or not the landlord is also the owner of the adjoining buildings. If so, the disruption caused may constitute a breach of the covenants and obligations in your lease but as you will appreciate this will very much depend on the specific terms of your lease. It may however be a starting point for any negotiations.
If the landlord is not the owner of the adjoining buildings then any reduction in rent would be at the discretion of the landlord and generally speaking commercial leases do not usually contain any clauses requiring the landlord to consider such a request.
In terms of the insurance obligations this will depend on the specific terms of the lease – does the obligation for example provide that premiums are to be reasonably and competitively priced? If not, the ability to challenge will be limited and as long as the landlord adopts a reasonable method when apportioning the insurance costs there may be little that can be done.
Please do feel free to contact me if you wish to discuss further.
Regards
Owen
Hi,
I am very happy to have stumbled across this blog and hopeful you can answer my questions.
Over the last 2 years our neighbouring buildings have had extensive renovation work causing disruption directly to our business. I applied for and received a temporary reduction in our business rates. Can we expect our landlord to also recognise the disruption and also offer a temporary reduction in our rent for the periods of time in question?
As many businesses do we pay our landlord insurance rent to cover the building insurance. I recently raised some questions about this as we usually pay close to £3000 a year to the landlord. After talking with several insurance companies I was told a policy to cover everything required by our lease and to the same level of cover for the building that the landlords policy covers it would cost less than £700. The landlord insures our building along with several others. He has provided me with a copy of one of the previous insurance policies which included ours and the other buildings. However, this also covers all other aspects of the landlords business insurance needs as whole policy and premium for the cover. The landlord has informed me they decide how much each premises should pay of the premium based on the area of the building. Our lease states what is required by the cover, that insurance rent will be charged ‘a fair and reasonable sum which the landlord spends each year to insure the property as required by the lease’. Are we being over charged to cover the landlords other insurance needs? If so how do we best dispute this?
As am I’m sure you can imagine these issues have come to light as we struggle to maintain our business and cash flow. Any advice would be greatly appreciated.
Regards,
Steven