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Commercial Property

Business Leases

For most businesses, the property that the business will operate from, or that it proposes to operate from, is the starting point for the creation of that business and the property and the terms upon which the property is acquired can be crucial as to whether or not the business succeeds long term.

Read more: Business Leases

 

Negotiating Lease Terms

There is often scope for prospective Tenants to negotiate on a variety of matters.  It is generally in the interests of Landlords to grant Leases, notwithstanding they may have to give concessions to in-going Tenants in order to entice them to take a Lease.

Read more: Negotiating Lease Terms

 

Inducements

These may include among other things (1) rent free periods and (2) reverse premiums.  Reverse premiums are payments made by the Landlord to the Tenant.

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Short or Long Term Lease?

Many Tenants are reluctant to commit themselves to long Leases, whereas Landlords are keen to obtain a long-term Tenant to enhance the investment value of their Property. Landlords may, however, be prepared to agree short-term lettings if the alternative is being left with an empty Property.

Read more: Short or Long Term Lease?

 

Break Rights

It is common for Tenants to want to have the fall back position of being able to end the Lease prior to the expiry of the contractual term.  Tenants may wish to end the Lease earlier if it transpires that the Property is too big, too small, or that the business simply does not work out as originally thought and/or does not generate the profits that were anticipated.

Read more: Break Rights

 

The Rent

In negotiating, the rent obligations imposed on the Tenant need to be taken into account. A Lease which imposes onerous obligations should attract a lower rent than a Lease that does not.

Read more: The Rent

 

Rent Reviews

Rent reviews are usually agreed at the end of every five years.  Sometimes this period is reduced to three years.  If a short Lease is granted it may not be appropriate to have any rent reviews.  

Read more: Rent Reviews

 

VAT on Rent

When considering the affordability of commercial premises, a prospective Tenant should check whether VAT will be charged on the rent and other payments having regard to its own VAT position.  

Read more: VAT on Rent

 

Continuation of the Lease

Business Leases are protected by statute, unless the statutory protection is excluded. The statutory protection can only be excluded in certain circumstances and then only with the consent of both parties, and after the required notice and declaration procedure is satisfied.

Read more: Continuation of the Lease

 

Repairing Covenants

It is a common provision in a Lease that the Tenant will be responsible for repairing the Property which, in the case of a self contained Property, will often include the main structure as well as the interior.  

Read more: Repairing Covenants

 

Hidden Liabilities

In addition to considering the potential repairing liabilities and costs, potential Tenants need also to consider whether or not there is any potential liability to remove any contamination from the Property or whether there is contamination at the Property which could affect its business.

Read more: Hidden Liabilities

 

Landlords Costs

In the days of a buoyant commercial Property market, it was quite common for ingoing Tenants to pay the Landlord’s legal costs. This needs to be considered in relation to the particular circumstances having regard to supply and demand.

Read more: Landlords Costs

 

Guarantors

If the ingoing Tenant does not have a proven track record or is a limited company the Landlord may seek personal guarantees from third parties (who are likely to be company directors in the case of a letting to a company) that they will pay the rent and comply with the other obligations imposed on the Tenant if the Tenant fails to do so. This is an important safeguard for the Landlord especially with companies with limited liability.

 

Early Access To The Property

Once the parties have reached basic agreement on the terms of the new Lease, it may take some time to complete the formalities.  Delays are likely if the new Lease is a sub-Lease and the head Landlord’s consent has to be obtained, or the Landlord may require other third party consents prior to being able to grant the Lease.

Read more: Early Access To The Property

 

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