What should I be aware of when taking a commercial lease?
27th June 2017

There are some pitfalls to avoid when taking a lease of a commercial property. We set out below some things to be aware of:

It is very important that you consult a valuer prior to agreeing your lease so that you can ensure that the rent that you are paying is market rate.

Rent review frequency.
Again, it is very important that you consult a valuer prior to agreeing the rent review frequency, so you can ensure that the landlord is not trying to take unfair advantage of you. Most, landlords will try and argue for an upwards only rent review clause which means that the rent can only be reviewed in an upwards only direction. We would advise you to ask for this clause to be on an upwards and downwards basis, so if the rent is being reviewed downwards then you can also benefit from that.

Term of the lease.
If you are entering into a longer term lease, you should consider negotiating with the landlord in order to secure a tenant break clause. A break clause allows you to terminate the lease provided that you adhere to certain conditions prior to serving the break notice and also on the break date. You should never serve a break notice without legal advice.

Repairing obligation.
You need to be very careful here, to ensure that you pay attention to the extent of the repairing obligation. Some, landlords will ask for you to “put and keep the property into good and substantial repair and condition”. You should be aware that a repairing obligation of this nature is stringent and could badly affect you when you come to vacate the property. You could be served with a large schedule of dilapidations.

Service charge.
You should consider agreeing with the Landlord a “fixed” service charge where the service charge will be the same all the time, or a “capped” service charge, which would be a ceiling over which the service charge payments could not exceed.

Assignments and underletting.
You should ensure that your lease allows you to assign and underlet the property with or without the landlords consent. In the event that you wish to move premises, but your lease has still some time left to run, the ability to assign or underlet your property is useful.

Rent suspension.
You should ensure that there is a clause in the lease which states the rent will be suspended in the event that the property suffers damage by an insured risk.

Damage by an insured risk
You should ensure that your repairing obligation omits you from the liability to repair in the event that the property is damage by an insured risk.

Schedule of condition.
You should try and limit your repairing obligation by way of reference to a schedule of condition. A schedule of condition, is basically a photographic schedule with wording confirming the extent of the direpair of the property at the time you take a lease of it. The lease will normally state that you are not liable to put the property into any better a state of repair and condition than is evidenced by the annexed schedule.

Rights granted.
If you are taking a lease of part of a property, it is essential that you make sure that you have appropriate rights granted to access the property though the common parts of the building; rights of car parking; rights to store bins; rights of support and also rights to enter other parts of the building in order to carry out works to your property.

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