Taking a new lease of premises is a serious step. You will 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.
You may be uncertain as to how long you want to use the property and may try and negotiate the right to end it early - a break clause. You may want to use the property for a new purpose or carry out alterations to it.
The landlord is also entering into a long term relationship and needs to be certain that you will look after their property and are capable of paying the rent.
Your landlord may hold the property under a lease and you may both have to persuade their own landlord that you are going to look after the property and be a good tenant.
Both landlords may want proof that you can pay the rent and may require bonds or guarantees. They may want to be certain that your new use of the property or alterations to it will not affect the value of the property adversely. If there are mortgages on the property their banks may also be concerned about the effect on the security.
This is why leases are much more complex than purchasing land outright, and why the documents are so long and complex.
Letting agents and the landlord will want your rent and commitment as quickly as possible and you may be keen to get in and start using the property. However it is unwise to jump into something as complex as a lease without a proper assessment of the risks. Despite what the letting agents may tell you, there is no such thing as a 'standard lease'. It will cost you far more and take more time to extricate yourself from hasty decisions that it will to sort it out properly in the first place.
Key Points to Consider Include:
Letting agents will produce 'Heads of Terms' at some stage. Once prepared they will argue that they are cast in stone, but they have no legal significance. They are very helpful, if properly prepared because they crystallise the intentions of the parties and give the landlord's solicitor guidance as to what should be put in the draft lease. However they are prepared by the landlord's agents and can be biased in their favour rather than yours.
We can advise you before the Heads are prepared as to what should appear in them. Indeed the Royal Institution of Chartered Surveyors has produced a model form. We may suggest amending the Heads to restructure the transaction in a way that will protect your position or even mitigate your SDLT liabilities in some cases. As always seeking early advice is essential.
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.
For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.