Derby Hub member Nelsons are the experts when it comes to legal matters. If you’re thinking about a business lease then this article will ensure you get the right lease for your business.
Thinking about a Business Lease?
- A business lease is a legally binding contract between Landlord and Tenant.
- Failure to comply with the terms of the lease this could result in court action which is costly and possibly detrimental to your business.
- This is why is it so important to obtain independent legal advice when taking on a lease and getting it right.
- Run through very briefly a couple of tips you need to consider when agreeing the terms of your lease.
Tip 1: Repairs
- Make sure that the lease does not require you to put the property into a better state of condition than when you first take the lease.
- Strongly advise you to undertake a photographic schedule of condition to document the current condition of the property at the beginning of the lease. To limit repairing liabilities.
- The schedule needs to be agreed between the parties and you can either instruct a surveyor to carry out the schedule of condition or do it yourself. If you do it yourself make sure that you take plenty of photos and make sure that you sign and date the schedule and keep this safe with your lease documents.
Tip 2: Rent Reviews
- The landlord cannot simply impose a rental increase. Your Lease may contain provisions allowing the Landlord to change the rent.
- If you have negotiated a rent review clause this needs to be clear and understandable to avoid any disputes.
- The basis of a rent review should normally be to the market rent but it may be linked to RPI or turnover rent.
- If there is an open market rental value provision it should disregard any improvements you make or any value arising from your business.
- You should also make sure that you have the ability to challenge the rent review by referring any disagreement to an independent expert or arbitrator to settle.
- Time is not of the essence.
Tip 3: Alterations
- Check the property first – do you need to carry out any alterations to the property in order to meet your business needs.
- As a starting point make sure that the lease allows you to make non-structural internal alterations without the landlords consent such as moveable portioning walls.
- Any other structural alterations – Landlord’s consent first.
- Landlord’s consent should be given within a reasonable time period 21 days and the landlord should not refuse without good reason.
- Also check the lease to see if you will be required to remove any alterations at the end of the lease.
Tip 4: Lease length, break clauses and renewals
- Make sure that the length of the lease is appropriate for your business needs.
- Consider whether you need a tenant only break right – opportunity to cancel the lease at a time that suits your business.
- Break right should allow you to walk away from the lease at a time that suits your business.
- Conditional only on having paid the principal rent up to date and giving up occupation of the property.
- The Landlord and Tenant Act 1954 – right to renew your lease at the end of the term UNLESS you agree to contract out of the Act in the correct procedure.
- Contracted in – legally entitled to renew – same terms – subject to rent and any modernisation UNLESS the landlord can prove certain circumstances for not giving you a new lease such as he is redeveloping the property or requires it himself.
Nelsons was founded in 1983 and has grown to become one of the largest law firms in the East Midlands with offices in Derby, Leicester and Nottingham. Visit their website here