As a tenant, entering into a new lease of a commercial premises is a big step.

You may be entering into a long-term liability that you cannot get out of easily. The liabilities will extend beyond paying the rent and rates to include such things as keeping the property maintained and decorated and complying with any requirements imposed by the landlord or by statute.

Your landlord is also entering into a new business relationship with you and needs to be certain that you will look after their property and that you are capable of paying the rent and complying with your other obligations under the lease.

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Taking Out a New Commercial Lease

It is advisable to agree the important deal making terms at the outset before incurring legal costs and the key points to consider will include:

  • How long do you want to be at the property and is the proposed lease length acceptable? You should make sure that you have all necessary rights to assign or sublet the lease to a third party should you wish and, if the landlord’s consent is required, it is not subject to onerous conditions
  • Do you want 'security of tenure'? This means that you will have a statutory right to request a new lease at the end of the term. If you don’t have security of tenure then the landlord is under no obligation to grant you a new lease at the end of the term and you may have to relocate your business
  • Would you prefer to have the option of breaking the lease at some point during the term? Will this right be mutual?
  • Will a rent deposit be required? If so, will the landlord agree to release this back to you at some point during the term if you can produce satisfactory accounts?
  • What is your intended use of the property and does it have the necessary planning consents?
  • Careful consideration should be given as to the extent of the property you are taking a lease over and whether this will be the whole building or part of the building and what each party's repairing obligations will be
  • If you need to carry out any alterations, will the landlord give permission and, if so, on what basis?
  • Would the landlord consider granting you a rent free period whilst you carry out your fit out works?
  • Have a look at the shared facilities and ensure that you have adequate rights to use them
  • If a service charge is payable how much is it likely to be and is it possible to put a cap on it?
  • Will VAT be payable on the rent, and can it be recovered?
  • Will Stamp Duty Land Tax be payable?
  • Can the landlord be persuaded to carry out any works or agree any other incentives?
  • What is the rent review period and on what basis will the rent be reviewed?
  • Instead of having a “full repairing lease” would the landlord agree to limit your repairing responsibility by reference to a photographic schedule of condition?

Heads of terms crystallise the intentions of the parties and once these initial terms have been agreed the landlord’s lawyer will use them as a guide when drafting the new lease.

They are not legally binding however and the respective parties' lawyers will negotiate the terms of the lease with the aim of achieving the best possible outcome for their client.

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The solicitors and legal experts at our 9 offices in the South of England are specialists in commercial leases. To learn more about our services, feel free to get in touch with our offices.

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Our experienced property team can help you with all of your lease related issues, from structuring new lease agreements to advice on ending existing leases.

Contact us today to arrange your complimentary initial consultation with one of our property law experts. Simply call 0800 999 4437 or click the 'Get in touch' button above.

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