7 things to be wary of if you are thinking becoming a commercial tenant
PUBLISHED: 18:41 21 August 2013 | UPDATED: 18:41 21 August 2013
We talk to Nick Bevan of Nick Bevan Consulting, and in the first of a series of short articles we discuss the risks of being a tenant in the world of Commercial Property Leases.
The next article will look at leases from a landlord’s perspective and the risks landlords face with regard to protecting the value of their property investments.
We have recently been acted in a sad case where the tenant has come to the end of their lease and presumed that the landlord would be ‘forgiving’ of their financial and other lease obligations only to find that the Landlord has taken a commercial view on the obligations of their legal agreement and is expecting the tenant to carry out significant works. When we investigated the case it transpires that the tenant never understood or even read some onerous terms of the lease and consequently was severely financially embarrassed by their recently discovered obligations.
Check what you are signing up to. We see many situations where a tenant has a different expectation of the areas of buildings and land from that which the landlord has granted a lease. A prospective tenant must ensure that he checks the extent of his rights and restrictions before you commit to a forma lease arrangement
Understand your obligations. Commercial leases will contain numerous ‘terms’ for a tenant to comply with; these are called covenants and are a tenants obligation to the landlord. Some of these covenants can be very onerous and WILL have a cost implication for you. It’s important to plan for these departures particularly in this market where landlords are offering substantial incentives to attract occupiers. These incentives can have a sting in the tail and need to be fully considered
Check whether your lease is excluded from the provisions of the Landlord and Tenant Act 1954. If this is the case, and a formal procedure needs to be adopted to make sure you understand this to be the case, you have no rights to remain in the property after the end of the lease. We see tenants presuming they can remain in occupation when this is not the case and have not made alternative provision to re-house their business, the consequences can be dire if this is the case
Make sure you keep your building in good condition. This is important because if the landlord believes you are not ensuring the condition of his property he may attempt to force you to carry out repairs during your occupation.
Check what repairs you are obliged to do. In leases there will almost certainly be an obligation to carry repairs and reinstatements at the end of the lease. Even if you make significant and expensive alterations and improvements to the property you may still need to remove these at the end of the term at your expense. We regularly see tenants having to remove expensive shop fittings, IT installations, heating and air conditioning.
Make sure you plan for departure. And that you plan carefully for your surrender at the end of the term. This needs to be planned well in advance of the date upon which you vacate to ensure you put yourself in the best negotiating position and can properly allocate time and financial resources to your vacation. Don’t assume that the landlord will want to renew your agreement, often he will wish to redevelop the property and while this action may offset your financial and repair obligations there will be significant issues to resolve.
Employ an experienced lawyer. It is essential that you have advice from a lawyer who deals with Commercial Leases regularly. The law is continually changing and test cases often change the emphasis of your obligations particularly with regard to the work to vacate the property it is essential that the person giving you advice is familiar and up to date with current case law
Nick Bevan Consulting have a very experienced team of Chartered Building Surveyors who are highly respected in this field, particularly in reducing the impact on Landlords claims for damages at the end of the term of the lease (referred to as dilapidations) please feel free to call one of our team for further practical, impartial and objective advice. Contact Nick Bevan Consulting Ltd for advice on leases at www.nickbevan.co.uk