Commercial Property Tips
The list is not intended to be exhaustive. Please remember that a commercial lease can be an asset, but it can also be a very expensive liability. Take proper advice before agreeing terms or entering into the lease. Beaufort Law can help you.
It is important for anyone considering taking on a new lease of commercial premises to take proper advice before agreeing Heads of Terms with the landlord or his agent. We find that once terms have been agreed it is virtually impossible to change them. Here are a few things for your “shopping list”:
- Make sure you don’t agree to pay the landlord’s professional fees.
- Ask for an initial rent-free period, especially if you have fitting-out works to carry out at your own expense.
- Think about whether you need a break clause in the lease. This is especially important if you are starting a new business, or if you might need to expand your business during the term of the lease.
- Be particularly careful about limiting your repairing obligations. Full repairing and insuring leases can be extremely onerous. The landlord won’t care at the end of the term if the property is in a better state of repair than when you took it on. If you have agreed a full repairing obligation he will expect you to hand it back in a state and condition which will enable him to put the property on the market immediately, and to get the best possible market rent.
- If possible, limit your repairing obligation to hand the property back in no worse condition than it was in when you took possession. You will need to have a Photographic Schedule of Condition agreed by the landlord and attached to the lease, to avoid a dispute at the end of the term.
- Commission a survey of the property, to establish your potential liability for repairs. It is a false economy if you don’t.
- In the case of a new building, it is essential to exclude liability for “inherent defects” in the construction of the property. This liability should remain with the landlord, who may well have a remedy against the builder.
- Find out if a service charge is payable under the lease, and if it is ask to see the last three years’ Service Charge accounts.
- You may be asked to provide a rent deposit or (in the case of a company) a personal guarantee, as security for the performance of your obligations under the lease. Take advice before agreeing either of these.
- Ask whether or not you will have security of tenure under the Landlord & Tenant Act 1954.
- In the case of leases for more than three years, the landlord may ask for a rent review. These should be at intervals of not less than three years, and every five years is preferable, depending on the length of the term.
- Take advice as to whether Stamp Duty Land Tax is payable on the transaction, and as to whether the lease needs to be registered at the Land Registry.
- Be wary of unsolicited phone calls from firms who say they can reduce your rates bill especially if they ask for money up-front on account of their fees.