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5 key points to consider before taking a commercial lease

Posted on March 12th 2021

If you are taking a lease for the first time or relocating your existing business, it is vital that you understand the terms before embarking on a new lease.

We recommend you consider the following key points (please note this is not an exhaustive list) before entering into a commercial lease.

Can I renew my lease at the end of the term?

The Landlord and Tenant Act 1954 provides security of tenure for business tenants. This means that the tenant may have the right to renew the lease at the end of the contractual term. The Landlord will only be able to refuse this new lease in limited circumstances.

However, parties can ‘contract out’ of these provisions meaning that the tenant will have no right to renew the lease and the property will have to be vacated at the end of the term. A tenant should take some time to consider giving up this right as it may have a negative impact on your business if you have built a good reputation from trading at a certain address.

Can I terminate my lease early?

A break clause allows the tenant and sometimes the Landlord to terminate their lease prematurely by serving an agreed period of notice on the other party. The lease may be ended on a fixed date or on a rolling basis. It is important to make a note of these dates and ensure you are able to meet the sometimes-onerous conditions imposed by the landlord. A break clause may be attractive for you as a tenant as it gives you the flexibility to exit the lease early should you need to.

Does the Permitted Use cover my business needs?

Commercial leases will typically state a specific use for the property which will be defined in the Lease as ‘Permitted Use’. It is important for you as the tenant to ascertain whether the planning permission that has been granted for the actual use of the property will conflict with your intended use. The tenant should also discover whether the landlord’s consent is required to change the use of the premises. We recommend you read this clause carefully to ensure the use is wide enough to cover your business needs.

What if I need to alter the property for the purpose of my business?

In order for the landlord to retain a degree of control over the premises, the lease is likely to require you to obtain consent from the landlord before carrying out any alterations. We recommend that you obtain the consent from the landlord before entering into the lease so that you know whether you can tailor the premises to your business.

Is the rent fixed for the whole term of the lease?

In longer leases, the landlord will usually require a rent review on certain dates during the term. This allows the landlord to change the amount of rent payable after a certain period of time. Landlords generally require an ‘upwards only’ rent review which means that the rent will only increase and the tenant will not benefit if the market rent decreases. It is important for tenants to be aware that the rent may increase and factor this in when arranging finances.

Before you sign on the dotted line, it is important to take advice from a commercial property solicitor to ensure the terms are tailored to suit your individual business and to prevent future problems, as the common saying goes ‘prevention is better than the cure’.

Due to the current COVID-19 restrictions we are unable to meet clients in person and instead our solicitors are able to conduct meetings online through a variety of video conferencing platforms or indeed via telephone conference which means that there is no need to travel or be local to Chester if you are seeking access to efficient and cost-effective advice.

If you would like to make an enquiry, please contact us by telephone on 01244 312306 or by email at law@oliverandco.co.uk.

 

Call and speak to a lawyer on 01244 312306