What are the key terms that need to be covered in a commercial lease? Part 3
In the final instalment in a three-part series of articles on commercial leases, Louis Mathers, commercial property solicitor with Parnalls in Launceston concludes his consideration of the key terms that need to be included in a commercial lease.
Assignment and subletting
Business needs may change during the life of the lease and the tenant may want to pass on (assign) the lease to another tenant or sub-let all or part of the property. The identity of the current tenant is of huge importance to the landlord, who will want to be sure the rent and other costs will be paid. Landlords must be reasonable in dealing with requests for consent to assign or sublet but they are permitted to set out in the lease a range of conditions they may impose (for example, guarantees and rent deposits) and circumstances in which they may refuse consent (for example, if the proposed tenant falls short of agreed financial criteria). If the tenant wants to share the property with other companies in the same group, permission must be granted in the lease. If the landlord wants to keep complete control of who the tenant is, the lease may include a right of first refusal (or pre-emption) giving the landlord the chance to take the lease back if the tenant wants to assign. Such provisions must be carefully drafted to be effective.
Landlord’s costs and service charge
The landlord will aim to recover all the costs associated with the property from the tenant. The costs clause in the lease will set out what the tenant must pay and will typically include costs in relation to any requests for consent under the lease and costs incurred in enforcing the tenant’s obligations. The cost of maintaining the structure and other shared areas will usually be dealt with as a service charge. The lease will set out what expenses the landlord can recover and may list some which are excluded. There will be a process for the landlord to estimate the expected costs for each year. The tenant will pay a quarterly sum, based on that estimate, followed by a balancing payment or credit once the landlord knows how much it has actually spent.
If the tenant does not comply with the requirements of the lease, the landlord will have a number of ways to enforce them. The last resort is to bring the lease to an end, by forfeiture. Recent changes in the law mean that the landlord can only do this by a court procedure but there must also be a statement in the lease that the landlord may forfeit the lease if the tenant fails to remedy breaches that the landlord has brought to its attention.
What the landlord and tenant agree when negotiating the lease will affect their relationship, the use of the property and the landlord’s income throughout the lease. Disputes can be costly, so it pays to get good advice at the outset.
For more information on commercial leases, or any other commercial property matter, please contact Louis Mathers on 01566 772375 or email email@example.com
New year, new home: tips to sell your home in the New Year
Tax Planning for your inheritance
Hearing loss: when your employer may be liable
Buying a home for your retirement, five things you need to consider
Farmers plan to diversify after Brexit
Ministers press ahead with probate fee shake-up - reports BBC News
Botched dental treatment? You may be entitled to compensation
Why a Health and Welfare Power of Attorney is a good idea
Will the new charge on building developments in Cornwall affect you?
Energy Performance Certificates – Do They Matter?
HMRC Challenging Stamp Duty Land Tax Payments
Ben Mitchell qualifies as a solicitor
The potential implications of Brexit on employment law
Appointing a guardian for your children
Houses in multiple occupation – new rules from October 2018
New Agriculture Bill published
Will Brexit affect my pension?
Dreaming of a holiday home? Sort out the legals before putting your feet up
Lasting Power of Attorney by Deborah Adams
Settled status after Brexit by Alexis Hager
How to choose an executor to administer your estate when you die
How overage agreements can boost profits from your land
Top tips for first-time buyers
How Could Brexit Affect My Farm?
Wills & Succession in Spain by Deborah Adams
Brexit – an international and local view by Alexis Hager, Litigation
Capital gains tax - important facts for non-residents of the UK
Buying a home: the importance of making sure the seller is entitled to sell
Changing a will after someone has died: it is possible and it could save you money
Your responsibilities when you have people working in your home
Sad passing of Battle of Britain pilot who served with Parnall family member
Considerations when buying a heritage property
Disciplinary proceedings at work: guide for employers
Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.