In the first
of a series of short articles we discuss the risks of being a tenant in the
world of Commercial Property Leases. The next article will look at leases from
a Landlords perspective and the risks Landlords face with regard to protecting
the value of their property investments
We have
recently been acted in a sad case where the tenant has come to the end of their
lease and presumed that the landlord would be “forgiving” of their financial
and other lease obligations only to find that the Landlord has taken a
commercial view on the obligations of their legal agreement and is expecting
the tenant to carry out significant works. When we investigated the case it
transpires that the tenant never understood or even read some onerous terms of
the lease and consequently was severely financially embarrassed by their
recently discovered obligations.
- Check what you are signing up to. We see many
situations where a tenant has a different expectation of the areas of
buildings and land from that which the landlord has granted a lease. A
prospective tenant must ensure that he checks the extent of his rights and
restrictions before you commit to a forma lease arrangement
- Understand your obligations. Commercial leases will
contain numerous “terms” for a tenant to comply with; these are called
covenants and are a tenants obligation to the landlord. Some of these
covenants can be very onerous and WILL have a cost implication for you.
Its important to plan for these departures particularly in this market
where landlords are offering substantial incentives to attract occupiers.
These incentives can have a sting in the tail and need to be fully considered
- Check whether your lease is excluded from the
provisions of the Landlord and Tenant Act 1954. If this is the case, and a
formal procedure needs to be adopted to make sure you understand this to
be the case, you have no rights to remain in the property after the end of
the lease. We see tenants presuming they can remain in occupation when
this is not the case and have not made alternative provision to re-house
their business, the consequences can be dire if this is the case
- Make sure you keep your building in good condition.
This is important because if the landlord believes you are not ensuring
the condition of his property he may attempt to force you to carry out
repairs during your occupation.
- Check what repairs you are obliged to do. In leases
there will almost certainly be an obligation to carry repairs and
reinstatements at the end of the lease. Even if you make significant and
expensive alterations and improvements to the property you may still need
to remove these at the end of the term at your expense. We regularly see
tenants having to remove expensive shop fittings, IT installations,
heating and air conditioning.
- Make sure you plan for departure. And that you plan
carefully for your surrender at the end of the term. This needs to be
planned well in advance of the date upon which you vacate to ensure you
put yourself in the best negotiating position and can properly allocate
time and financial resources to your vacation. Don’t assume that the
landlord will want to renew your agreement, often he will wish to
redevelop the property and while this action may offset your financial and
repair obligations there will be significant issues to resolve
- Employ a proper an experienced lawyer. It is essential that you have advice
from a lawyer who deals with Commercial Leases regularly. The law is
continually changing and test cases often change the emphasis of your
obligations particularly with regard to the work to vacate the property it
is essential that the person giving you advice is familiar and up to date
with current case law
- At Nick Bevan Consulting we believe in giving you
more than you expected hence point 8! We have a very experienced team of
Chartered Building Surveyors who are highly respected in this field,
particularly in reducing the impact on Landlords claims for damages at the
end of the term of the lease (referred to as dilapidations) please feel
free to call one of our team for further practical, impartial and
objective advice.
Contact Nick
Bevan Consulting Ltd for advice on leases at www.nickbevan.co.uk
No comments:
Post a Comment