Don’t get ripped off, use a solicitor to help you negotiate the best deal!
We will ensure the right questions are asked to the landlord, provide you with our experience and comments on any extras and heads of agreements. We will review the title to the property, highlight any issues relating to the property, landlord answers and the lease, assist you with any negotiations, help you calculate and pay any stamp duty and ensure the lease is properly registered so that you can rely upon it.
A new lease is likely to cost between £800 – £1,000 + vat for our fees but may be more depending on particular requirements
Renewal of a Commercial Lease
Commercial leases are generally very limited in duration – three, five, seven, fourteen years commonly.
In some cases, the law provides limited security of tenure to business tenants – that is, if tenants wish to, they can require landlords to provide them with a further lease at the end of the current one.
It is sometimes very important for a business to keep it’s current premises. So you will want to be sure that your right to a new lease is respected.
To be sure of this, there are tight timetables for showing your intention to stay and responding to your landlord if s/he wishes you to leave. Missing them can be catastrophic, depriving you of your right completely.
Our commercial team, Graham Wright, Richard Napier and Adrian Albinson, can advise you exactly how to go about this. You are well-advised to see them well in advance of the expiry of the lease to explain exactly what is required.
Whether you are entering into a new lease or ending an existing one, our experienced team can help you with any of your lease-related queries.
Whatever a lawyer may say they will aim to produce a balanced and fair lease that is only amended to reflect an individual's quirks that the landlord and tenant have agreed upon. This approach is actually quite sensible because no lawyer wants to report to their client that the whole transaction is held up or lost because they have been caught trying to be smart!
The more information you have, the clearer the instructions you can provide at the outset. The clearer you are, the quicker the lease will be agreed, the fewer the re-drafts, the cheaper the job, the happier you will be.
What is so interesting about the word “demise”?
This is often simply the postal description of the property!
Demise is simply 'lawyer speak' for the description of the property being let. It can, however, be used quite cleverly to include and exclude parts of a building. Why is that important? Whether the roof joists or the structural walls are or aren’t included in the ‘demised premises’ affects who is responsible for fixing them if they go wrong.
It is extremely helpful if you think about the structure and shape of the building being let:
(a) Find out what the boundaries of the property are on both a vertical and a horizontal plain.
(b) Provide us with a plan of the premises showing not only the boundaries but also common areas, parking, access routes etc.
(c) Tell us whether it is part of a bigger building or whether it is a free-standing unit.
(d) Tell us what type of building it is; Victorian shop or industrial park tin shed.
(e) Are there any common areas, stairwells, toilets, parking spots etc which you require access over, and if so, consider who will be responsible for them?
(f) Tell us whether you have agreed to the provision of car parking spaces, if so how many and where?
Who is the landlord anyway?
This should identify EXACTLY who owns the property? Is the owner a company, a charity or trust or an individual? Please provide their full name and address. What is their company number? Who is authorised to sign the lease?
Ll’s representatives: Who are the Landlord’s Solicitors and who are their Agents?
Who is the tenant anyway?
This should identify EXACTLY who is to rent the property a company, a charity or trust or an individual? What is their full name and address? What is their company number? Who is authorised to sign the lease? Do you envisage any change in the Tenant either through restructuring, incorporation or sharing the property with another business or part of the business?
T’s representatives: Who are the Landlord’s Solicitors and who are their Agents?
For how long will the lease be?
How long is the lease for? What are the start and end dates? If you are proposing to enter the property a month early so as to allow ‘fitting out’ it is generally usual to bring the start date of the lease forward so as to include this period.
LANDLORD -Bringing the start date forward protects the Landlord since he knows the Tenant must continue with the lease once the property has been altered and he knows the Tenant must keep the property in repair.
TENANT – Bringing the date forward protects the Tenant since he may be investing time and money in sorting the property out and he wants to know he’s got the right to use the property once it’s just right.
Why are 7 year leases or longer so much hastle?
Please note if the lease is to be longer than 6 yrs 364 days it will need to be registered at the Land Registry. There are a number of knock on consequences. (1) Land registration fees (2) The need to provide higher quality plans of the premises (if a lease of part) (3) The increased risk of the Tenant having to pay Stamp Duty both on the grant of the lease and on every rent review. If you want to see if Stamp Duty will be due, try adjusting the length of the lease to see the effects on duty payable.
What is the 1954 ACT and how can it help me?
In 1954 the government gave commercial tenants a significant number of rights. Fundamentally, it was felt unfair that established business were being held to ransom by Landlords when their leases expired. Until then many were faced with a choice; either pay a premium or an excessive rent or be forced to move with all the costs and disruption that this caused. These rights continue today. Businesses are entitled to a new lease on a fair rent when their old lease expires. If the business is forced to relocate for one of the permitted reasons within the act, the Tenant is entitled to compensation. If the Tenant is forced to leave behind improvements to the property the Tenant is entitled to some compensation for losing these. NOTE: The compensation is complex to calculate and since it is pursuant to a formula it does not necessarily compensate the Tenant for the whole of his loss.
It is possible to opt out of the 1954 Act protection regime. Many Landlords are currently insisting upon Tenants agreeing to this. There doesn’t appear to be any difference to the rental obtained on property with or without the 1954 Act protection.
Is the Landlord going to carry out any works to the premises prior to the Tenant entering into the lease? If so, it would be extremely helpful if you could list;
(a) What work is to be done?
(b) At who’s expense?
(c) In what time scale?
Are there any planning permissions or other regulatory matters to sort out prior to committing to the lease? If so;
(a) What is required?
(b) Who is obtaining it?
(c) At who’s expense?
(d) In what timescale?
Is there a sitting tenant? If so is there an existing lease to be surrendered? Please provide details of;
(a) The sitting tenant
(b) Their agents
(c) What has been agreed with them.
Why give incentives to potential tenants?
Is the Landlord providing (or receiving) any incentives for the Tenant to take the lease? The most common form is a rent free period for the Tenant whilst fitting out. At the moment rent free periods of up to 6 months are not uncommon in Warrington.
You are going to use the premises for what?
What are the premises to be used for? If you are the tenant, you are well advised to find out what the premises currently have planning permission for and whether the existing planning permission will cover your proposed use. We suggest you contact the local planning officer on 01925 443322 or visit: http://www.warrington.gov.uk/planning/
If there is anything particularly unusual about your proposed user, please let us know. For example, will it result in your needing access at unusual times? Will it involve hazardous materials, heavy machinery or noisy activities?
How can a tenant make alterations to the premises?
The Landlord will insist upon being notified of and agreeing in advance to any alterations of the property. If the Tenant is to carry out alterations to the premises then these need to be discussed with a reputable builder and signed off by the Landlord prior to entering into the lease.
Will there be alterations to the premises? If so, please give us a rough outline as to what these will be. If the Tenant has appointed a builder, who and what are their contact details?
What is a rent review?
It is very common for there to be a rent review during the term of your lease. Traditionally these have been ‘upwards only’ i.e. the rent either goes up or stays the same. There are two schools of thought on rent reviews; either the rent goes up by inflation or the rent is increased to reflect the perceived market value of the premises. Inflation reviews are much cheaper and more certain but letting agents do not like them, guess why!
Matters to consider in the current economic climate include:-
(a) If the term of the lease is fairly short is a rent review appropriate at all?
(b) Inflation is running far ahead of market rental values at the moment. This may colour your choice of rent review clause but clearly the economic climate may change.
(c) It is only a matter of time before we see upward and DOWNWARD rent review clauses.
If there is to be a rent review clause please let us know;
(a) When the reviews are to take place
(b) What mechanism will be adopted and, if it is to be a market appraisal, who is to bear the cost of the surveyor?
What are service charges and who pays them?
Is the Tenant expected to pay a contribution towards the maintenance and/ or provision of services on the premises or the Landlords estate?
(a) What services the Landlord is going to charge for? are they all appropriate for the Tenant’s user?
(b) If there is more than one Tenant on the Landlord’s premises, how is the service charge to be split between the Tenants? What if one of the properties is empty?
(c) What is the existing and anticipated level of service charge? Is there any reason why the current level will be different in the future? Will the Landlord expect the tenant to contribute to any expensive work in the future?
Why state insurance relating to premises?
It is almost industry standard these days for the Landlord to insure the property (but not the Tenants contents) and for the Tenant to reimburse him. If, however, the Tenant is intending to carry out expensive building works on the premises this situation can be reversed. At the very least the Tenant will want to know that the building works are covered at every stage.
It is also very common for the Landlord to insure against loss of rent for around 3 years if the premises are destroyed or substantially damaged. The Tenant needs to consider whether he is willing to pay for this extra insurance, particularly so if he is going to take a short lease.
There is often a degree of tension between Tenant and Landlord about what is insured against and at what cost. Tenants will also wish to consider the nature of their own business and how it might affect the landlords insurance. The Tenant will also want to know if the cost of insuring the landlords premises is shared out if the Tenant is only taking a part of the property.
If there are any particular arrangements for insurance what are they? What is the insurance premium currently? Will the insurance terms cover the Tenant’s use? Is there any reason to think that the premium will be increased?
Who pays the legal costs?
Who is to pay the Landlord’s solicitors legal costs? If the Tenant, has any cap been agreed?
There are really two approaches here and lots to look out for. The lease will either be a ‘full repairing lease’ or an ‘internal redecorating lease’.
In either event you will have to look carefully at what it is the tenant is being required to do, if the lease provides that the Tenant will put and keep the premises in tip top condition then the Tenant will have to do just that no matter what state the premises are in when they went into occupation and no matter how short the lease. Equally the lease may provide simply that the premises are kept in no worse condition what at present, fair wear and tear excepted.
You will both need to consider the state of the premises, the length of the lease etc and have to decide whether it is appropriate for the tenant to be wholly responsible for the premises or whether the land lord should be responsible for the structure of the premises, foundations, shared walls roof etc.
How can you protect your back regarding the condition of the premises?
Unless the Tenant is willing to take on a full repairing lease of the premises, it is essential that some record is made of the condition of the premises when the tenant entered in possession of them. Depending upon the degree of obligation and the age of the property we would recommend a structural survey or a photographic, video and written record of the condition of the premises.
Who is going to carry out the survey? At who’s expense? Is the schedule of condition going to be signed off by both the Landlord and the Tenant?
What else do i need to know about?
There is a never ending stream of regulatory requirements imposed by the government on Landlords and Tenants. At the very least, the Landlord should be asked to produce an energy performance certificate, a gas test certificate, a fire safety plan, an asbestos survey of the building.
Whatever your lease related issue, the experienced team at AN Law are here to help.
Tim qualified as a solicitor in 1963 and has just achieved his 50 years in practice certificate from the SRA. He has a broad knowledge of many areas of law, however in the last ten years he has focused on wills, probate, trusts and commercial and residential conveyancing. He is ably assisted by his P.A. Julie Walsh and despite his advancing years still works full time.Tim enjoys spending time with his family and travelling around Europe looking at trains.
Graham studied at the University of Oxford and is a consultant solicitor, specialising in commercial property and litigation. Outside of the office, he is a local councillor and school governor.
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