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  • 17 Jun 2024

    5 reasons why you should instruct a solicitor when taking a commercial lease

    Almost every business has property requirements and whether you are buying, selling or leasing commercial premises, we can help.

    Protect your position

    The initial draft lease will usually be issued by the landlord’s solicitor and inevitably will be heavily weighted in their favour. Commercial leases are often both lengthy and complex and even subtle differences in wording can make a big difference to your obligations and liabilities. It is therefore important you are fully aware of your commitments before you sign and that the lease terms are negotiated, so as to limit your liabilities and ensure the property works for your business.

    Do you have security of tenure?

    Although it is common for the statutory right to security of tenure to be excluded in a commercial lease, the right, which can oblige your landlord to grant you a further lease at the end of the contractual term, is a valuable one. If a lease is to be contracted out of this protection, this should be reflected in the rent payable. 

    In addition, where you have already been in occupation, statutory rights may already have accrued and by signing a new “excluded” lease, you could be unwittingly signing your rights away.

    Are you fully aware of your repair obligations?

    Many commercial tenants do not realise how onerous the repair obligations in their lease are. Leases are often drafted on a “full repairing” basis, meaning that irrespective of the condition when the tenant first took occupation, they will be required to put and return the property to the landlord in good repair at the end of term.

    If you are taking on premises which are not in a good state of repair, by not seeking legal advice, you could find yourself responsible for bringing the property up to the required standard, which could be very costly.

    Exit strategy

    What if you no longer need the premises for the purposes of your business? Once the lease has been completed, you will be committed to pay the rents for the term and, unless the lease provides otherwise, you will be at the landlord’s mercy as to whether you can exit sooner. Most leases permit the tenant to assign (or transfer) their lease to a third party with landlord’s consent (not to be unreasonably withheld), but usually there will be conditions attached to the giving of that consent, for example, that the outgoing tenant guarantees the performance of the incoming tenant, of which you need to made aware. In addition, a tenant may want to consider negotiating a break clause to allow an early exit usually on a set date, but again tenants need to be wary of landlords attaching onerous conditions to the break which can render it effectively worthless.

    What does it mean to be a guarantor? 

    Where the tenant is a limited company, the landlord may require a personal guarantee from one or more of the directors. 

    The guarantee will make all the obligations of the tenant company enforceable against the director personally and therefore it is important to ensure that any guarantor is properly advised on the liabilities they personally will be taking on.

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