Tips and Traps – Commercial Leases

What do I need to know when renting a commercial property?

When have an agreement with a commercial landlord, you take take on a considerable amount of onerous obligations. Unless you what these are and what effect it will have on your business, you could find yourself in a worrying situation in the future.

You will firstly need to know what your liability is  for repairs. What about improvements that you do? How do I limit these obligations? What if the repairs come to light after the  agreement? We can negotiate the terms to accommodate all these points.   It is always advisable to have your documentation thoroughly checked by our Kiran Walia a specialist commercial lease solicitor who will be able to identify any flaws in your agreement and help you negotiate more favourable terms.

Can I sublet?

A tenant may wish to sub-let if it is unable to assign (sell) part only of its property, as assignment of part is often prohibited by a lease whereas it is more common to see sub-letting of part permitted. A tenant may also wish to sub-let if it wishes to dispose of its property on a temporary basis but wants to be able to go back into occupation at a future date. Sub-letting may also be an alternative where the lease rent is higher than the current market rent, making it difficult to assign the lease. If the lease permits sub-letting at lower than the lease rent, the tenant will find it easier to sub-let (although it will of course have to make up the shortfall in the lease rent at its own cost). We at Garner & Hancock can consider a subletting provision to allow you flexibility.

Can I extend my commercial lease?

Many commercial leases of six months or more enjoy security of tenure due to  the Landlord and Tenant Act 1954. This means that when the lease period expires, the tenant is automatically entitled to a further lease, providing certain steps are followed. Landlords can, however, oppose a lease renewal under the 1954 Act, although the grounds for doing so are limited.

If your commercial lease does not include security of tenure under the 1954 Act, you will need to negotiate an extension or renewal of your lease with your landlord.

 What should we budget for when buying commercial premises?

Aside from your legal fees for commercial property conveyancing, you will need to allow for Stamp Duty Land Tax; Land Registry fees and fees for any surveyor you engage to report on the condition of the building.

My company is purchasing a commercial property with existing tenants in place. Can we change the terms of their leases?

It is not easy or straightforward to alter the terms of existing leases; however you may be able to negotiate changes with the tenants directly. Bear in mind though that tenants are unlikely to agree to any changes that are not to their advantage. Therefore, if it is important to you then you should consider offering them something beneficial in return for their agreement. A commercial property law expert will be able to assist you through such negotiations.

Can I make changes to the commercial property I am leasing?

It is usually the case that most commercial leases include restrictions on what, if any, alterations can be made to a property by the tenant. Whilst minor internal alterations may be permitted, it is rare for leases to allow anything of a structural nature or changes the exterior of the building without prior consent from the landlord. If you are unsure as to what is and is not allowed under the terms of your lease, commercial lease solicitors will be able to advise you.

Contact Kiran Walia on 0208 232 9560 for advice.