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ASHLEY BEVANS: Negotiating a commercial lease

By Herald Express  |  Posted: March 13, 2014

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THE thought of taking on a new lease of commercial premises, whether for the start of a business or otherwise, can seem daunting. A legal document such as a lease contains many obligations and liabilities which may not initially be apparent. It is therefore extremely important that in negotiating any new lease the main clauses should be clear and understood at the outset.

The following are some of the most important areas to consider:

Who will the tenant be? Will the lease be granted to an individual or to a company and if to a company will a guarantee be required?.

The premises should be clearly described. What about parking — is there a need for additional space or is there just a right to use existing space?

How long will the lease be for? Typically the shortest lease term will be for no less than a year but there is no minimum or maximum period.

Leases that are granted with the protection of the Landlord and Tenant Act 1954 are normally longer term and great care needs to be taken to ensure compliance with the Act's detailed requirements.

Will there be any break clause? This is the ability for either the landlord or tenant (or indeed both) to give notice to end the lease before the contractual term has expired. The manner and timing of a break notice will be interpreted strictly

Will the rent be fixed during the lease term or subject to review? Typically rent is reviewed on an open market basis but could also be based on RPI or indeed turnover. If VAT is to be charged on the lease rent then evidence from HMRC should be given by the landlord of their decision to opt to tax.

Will any security be offered as part of the lease? This could be by way of rent deposit or guarantor (but not both). A guarantor may be preferable in that it does not involve any additional upfront monies though it does mean the landlord has claim against the guarantor in the event of any tenant default.

A full repairing and insuring lease is essentially that: a tenant is responsible for repairing the premises as defined but the landlord is responsible for insurance. The cost of insurance and any exterior repairs will be made recoverable from the tenant. The condition of premises should be carefully considered as to whether repairs should be qualified and any amendment to the definition of "Property" in the lease appropriately drafted.

Shorter term leases often restrict the ability for a tenant to assign/sell and sublet premises. Where this is permitted it is normally only with landlord consent and again the conditions of any requirements for assignments or subletting within a lease should be carefully drafted.

Finally, does the current use of the premises fit in with your future intentions? A tenant will be responsible for ensuring that all statutory consents such as planning are obtained for the proposed use and appropriate checks should be made with the Local Authority. If a planning application is required then a prior agreement for lease may be necessary.

Getting things right at the outset can save a lot of time and cost later on. We would always advise engaging a solicitor to discuss these at the earliest opportunity to ensure that the lease will be appropriate for your needs.

Ashley Bevans is a solicitor at Boyce Hatton in Torquay and can be contacted on 01803 403403.

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