What to consider when taking on a commercial lease?
As a tenant, signing a commercial lease is a big decision. However, if you know the ins and outs, you can avoid problems in the future.
In this blog, our solicitors for commercial property talk about how commercial leases work and what tenants should think about before signing one.
What is a lease for a business?
A commercial lease is a contract between a landlord and a tenant that is enforceable by the law. In exchange for rent, this lease lets the renter use the property for business for a certain amount of time.
The lease will say how long the commercial property can be used and what the landlord and tenant’s rights and responsibilities are during that time. This could include rules about how the property can be used, like what kind of business can or can’t be run there and who is responsible for making any changes or repairs to the property.
What is the difference between giving a lease and giving it to someone else?
Giving a lease and giving it to someone else are two different business transactions.
When a lease is given, it is made for the first time. A landlord gives a tenant a lease so that the tenant can have full use of land or property for a set amount of time (called a “term”) in exchange for rent.
To assign a commercial lease, one party gives the remaining time on an existing lease to another party. For example, a tenant can give the lease to another business owner if they no longer want to use the office space they are renting. Before a tenant can give their lease to someone else, the landlord usually has to agree to the transfer. This would be written down in a “licence to assign” document from the landlord.
When getting a commercial lease, what should a renter think about?
Aside from the obvious business terms like rent, term rent review, and lease breaks, the Landlord and Tenant Act of 1954 is one of the biggest risks for a tenant who signs a commercial lease.
The Landlord and Tenant Act of 1954
The Landlord and Tenant Act of 1954 says that commercial tenants have the right to a lease renewal at the end of the lease’s term and can stay in the property. This gives tenants security of tenure, which gives them the right to stay in the business space even after the lease term is over.
Under the Landlord and Tenant Act of 1954, the commercial tenant can keep renting the property even after the lease is over. The landlord can only end the lease by following certain rules in the Act.
Getting an agreement on rent and rent times
In the lease, the amount of rent and how often it is reviewed are written down. The rent can be changed to keep up with inflation or to match what the property is worth on the market right now. But before signing a lease, it’s important for renters to check for rent review clauses. A solicitor who specialises in commercial property can tell you what the terms of the rent review are. A surveyor is also someone you should talk to for advice.
Fees for services
Service charges are often part of a commercial lease for a part of a building. These charges cover the cost of maintaining or fixing the property. The service charge clause in a lease can be explained by a solicitor who specialises in commercial leases.
Check how well it’s being fixed.
When a commercial lease says that the tenant must keep the property in “good condition” but the property wasn’t in that condition when the lease started, this catches many tenants off guard.
Before signing a commercial lease, it’s important to check the condition of the property and how that matches up with the tenant’s repair clause in the lease. It is suggested that you talk to a surveyor about how much you have to pay for repairs.
Contact our expert commercial lease solicitors
There are risks and obligations that come with a lease. That’s why it’s important to look at the terms of a commercial lease and any other paperwork that goes with it.
The law is complicated when it comes to commercial leases, so it is best to talk to an experienced commercial property solicitor about your options.
Call our commercial property solicitors at 0161-225-8181 or fill out our online enquiry form for straightforward, useful advice.