All of the fundamental terms of a commercial tenancy are contained in the document itself, unlike residential tenancies which have a range of legislation to protect the rights and well being of the Tenant, commercial Tenants are deemed to be capable of looking after themselves and much less protection is implied for the Tenant.
Heads of TermsAll of the agreed terms should be documented right at the outset in the Heads of Terms, even if the parties are not using land agents or professional consultants to broker the deal. A lease can take several weeks to conclude and it is often necessary to refer back to heads of terms to remind the parties what was agreed at the negotiation stage.
The lease, once drafted and entered into, will deal with a range of issues such as how much rent is paid, when, to who, can the rent be increased, who insures, who repairs etc. The lease will also cover a range of more unusual circumstances such as what happens if the building burns down or there are issues with the condition of the building. If you ever ask a solicitor what happens if… in relation to a commercial lease the answer will invariably be, what does your lease say?
It is often the case that the parties are keen for the lease to be completed as soon as possible after heads of terms are agreed. I have completed a lease of part of an office building in one week but that was an exception and not the norm! It is imperative that Landlords do not allow eager Tenants into occupation until a lease has been completed, or if they do want to allow a Tenant into occupation early it is essential that they instruct their solicitor to prepare a Tenancy at Will or a Licence to Occupy which will bridge the gap between agreeing heads of terms and completing a formal lease.
Licence to OccupyA Licence to Occupy is simply a permission granted by the Landlord to the eager Tenant and it records the extent of the Tenant's rights in relation to their use of the property. In the event the lease negotiations fail, the Landlord can simply withdraw their permission and bring the Tenants occupation to an end with the minimum of fuss.
If, in the same scenario, there was occupation by a Tenant without a written licence or a written Tenancy at Will, the Landlord may have real difficulty recovering the property quickly. Depending how the long the status quo is allowed to continue the Landlord may even inadvertently create a protected tenancy which allows the Tenant to stay in the property.
More informationIt is in the interest of all parties to have the benefit of a considerate, negotiated and properly drafted agreement which removes all doubt in the event there is an issue in the future.
The Commercial Property team at Pinney Talfourd Solicitors can assist with all aspects of commercial leases. Please contact any member of my team on 01708 229 444 and we will be happy to help. Alternatively, click here to find out more about our commercial property services.