It’s that time of year when the issue of moving to new premises may come to the fore. We consider some headline issues on new commercial leases.
Summer’s officially here and things are starting to finally heat up. You may want to move premises, but when there is the business to take care of, the finer detail of entering into a new lease is the least of your concerns.
You have found the ideal premises in the ideal sunny location but before you sign on the dotted line, take a few minutes to cool down and consider some headline issues which often arise and will affect your occupation of the premises, such as:
- “Contracting out of the 1954 Act” – The Landlord and Tenant Act 1954 gives the tenant a right at the end of their lease to renew. If you are “contracted out” you will not have an automatic right to renew your lease when it expires.
- “Alienation” – This is a general term allowing the tenant to dispose of or sell their interest either in part or whole. Generally speaking, there are two main ways: by assigning a lease to a new tenant i.e. transferring the lease, or by sub-leasing i.e. creating a new lease for a term shorter than the original lease.
- “Repairs” – Commonly, the tenant will be responsible for internal repairs. However, if there are any problems before the start of the lease, you will need to agree who is going to deal with the works and how. The cost of repairs can run into thousands of pounds and if you don’t comply the landlord can sue the tenant for damages. Most tenants think they are responsible for maintaining the premises in the condition it was at the start of the lease. More often than not a tenant is responsible for keeping and handing back the premises in good condition regardless of the condition at the start of the lease. This may lead to an agreed “Schedule of Condition”
- “Schedule of Condition” – Frequently, a tenant wishes to improve the premises and may want a schedule of condition. This is a report, prepared by the tenant but agreed with the landlord to show the condition of the premises at the start of the lease. It is included as part of the lease to ensure that the tenant is only obliged to maintain the property in the condition it was at the start of the lease
- “Service charges” – These cover anything from utilities, insurance, the cost of maintenance of shared areas e.g. toilets/kitchens of a building, to accessways/hallways/outside space and other common parts of a shopping centre or an industrial estate. A tenant should negotiate service charge obligations which are appropriate to the term of the lease and, significantly, the condition of the premises
- “Stamp Duty Land Tax (SDLT)” Lastly, be mindful that Stamp Duty may well be applicable depending upon the rent payable and the term of the lease.
The above is only a very general summary of some of the fundamental terms of a lease. Please contact our Commercial Property Department for specific advice.
This article was written by Andrea Harley, Associate Solicitor in the Commercial Property Department at Pinney Talfourd Solicitors. This article is only intended to provide a general summary and does not constitute legal advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at June 2015.