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Understanding Business Leases – A Tenant’s Guide

08th August 2016

A lease is a contract between you and a landlord giving you an exclusive right to occupy and use a property.  Just as any other contract, the lease reflects the circumstances that the parties have agreed and the needs of those parties.  So a short lease over a small space will be wholly different from a much longer lease over a high quality premises.  Longer leases also need to allow for circumstances to evolve during the life of the lease.

Whilst you should ensure that you are fully cognisant with your obligations, there are a few key things to check at an early stage.  As a non-exhaustive guide, consider the following: –

• Be aware of your fixed term and when it will end;

• Check the application of the Landlord and Tenant Act 1954 – this Act is valuable as it allows a tenant certain rights to renew;

• Be aware of the dates and the mechanism that will govern any rent review;

• If you are taking a lease of part of a building there is likely to be a service charge – consider trying to agree a cap to minimise the amount of expenditure, particularly in the early years;

• The lease may grant rights and reserve rights.  Be aware of who can come onto your premises and what obligations there are on them should they do so and vice versa;

• Insurance clauses need to be read carefully.  Customarily the landlord will insure, but you will have your own obligations – be clear on what these are;

• There will likely be repairing obligations on you.  Bear in mind that keeping the property in ‘repair’ usually means that you must put the property into good state of repair even if it was not in a good state when you took the lease;

• Usually there will be controls preventing you from transferring the lease to a third party without the landlord’s consent;

• The lease usually stipulates how the property may be used.

Ultimately, as a tenant you should bear in mind that a lease is a ‘living’ document, drafted by the landlord so weighted in his favour.  It governs an ongoing relationship with your landlord.  You must be aware of exactly what your obligations are otherwise you may find yourself in a position where you are liable for an expensive cost that you were not anticipating.

Danii Jhurry-Wright. Partner, Commercial Property department.

Business, Commercial Property, General, George Ide, News
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