Commercial Leases and Commercial Conveyancing explained for all our Entrepreneurs

Great – you have decided to start your own business and now taking up a new Commercial Lease at a Premise. You have negotiated some Heads of Terms with the Letting Agent and are now confused about what you have to do next?

Not a problem! We have, in association with the Commercial Conveyancing team at Express Conveyancing, unravelled the mysteries of what Commercial Leases entail and also what you will have to do and lookout for as a ‘New Tenant’.

What is a Commercial Lease?

Similar to a Tenancy Agreement when you rent a property, the ‘rental agreement’ for a Business at a Commercial Premise is a Commercial Lease. The Landlord is the person (or company) who owns the premise while they let it out to you.

You must take great care when entering into a new Commercial Lease (as you would with any form of contract), especially since unlike Residential Tenancy Agreements, Commercial Leases tend to run for at least 5 years (not unusual for the term to be longer). Any and all forms of agreements you have with your Landlord at this stage will almost be ‘set in stone’; and any variations to these terms will result in significant cost you as the Tenant!

Though in theory, you as the Tenant, do not need a Commercial Lease Solicitor (usually the Landlord will always have one), you must always instruct your own Commercial Conveyancing Solicitor. The Heads of Terms above (your initial agreement on terms between the Landlord/Agent and yourself) are almost always subject to change, meaning it is not uncommon to find final versions of Commercial Leases which are completely out-of-sync with the original Heads of Terms negotiated.

A few key points to remember when it comes to Commercial Conveyancing and Leases

Though your Commercial Conveyancing Solicitor will advise you on all provisions in detail, for example your obligations as the Tenant, obligations on the Landlord’s part so on and so forth; we have listed a few key points which are common for all Commercial Leases.

Naturally, these are very brief, snippets of what a typical commercial conveyancing matter entails and you should always seek professional (and independent advice) from your Conveyancer.

1) Rent Review –

Commercial Property rent review provisions are largely unregulated. What this in effect means is that unlike your traditional, Leasehold Residential Property, the rent will NOT be increasing in line with a standard index such as RPI. There are three main ways in which rent is reviewed on a Commercial Property.  You can find more details on these in the following comprehensive article focussing on the various Rent Review Mechanics.

As briefly discussed earlier, given what you agree with the Landlord at this stage of the Transaction in effect becomes a legally binding contract; an incorrect (or you unassumingly agreeing to an unfair) rent review mechanism at this stage will have serious implications on your business and yourself in the long term.

2) Break Clauses –

Given the length of Commercial Leases, it is important you agree to a reasonable and fair Break Clauses. A Break Clause, in effect, allows you as the Tenant (and in some cases, the Landlord) to have the opportunity to sever the Lease before the end of the Term. Generally, Break Clauses fall every two and a half years but of course will vary depending on what type of business you are running. Your Conveyancing Solicitor will discuss (and negotiate these terms) with you in detail.

3) Dilapidation Provisions –

The simplest way to define dilapidation is ‘damage’ caused to the property, which has breached a term of the Lease. A Dilapidation Notice can be served by the Landlord even after the Term of a Lease has lapsed and the Tenant has (at the time) surrendered the premise without any notification of a breach at the time.

Your Commercial Conveyancing Solicitor will work with you at the time of agreeing the Lease to ensure sufficient provisions have been set in place to make these ‘dilapidation provisions’ either restrictive (within reason) and the at best – time limited.

 

Given Commercial Conveyancing is as broad as it is wide, preparing a ‘one-size-fits-all’ document is practically impossible. Please contact the Commercial Conveyancing Team at Express Conveyancing directly, if you have any further questions or are considering taking up a Commercial Premise.

 

 

 

 

 

 

 

 

 

 

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