Commercial Property

Commercial property & premises play a key part in most businesses. Here's how we can help protect your investment. 


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Commercial Property FAQs

  • I have been asked to provide a Rent Deposit Deed – what is this and how does it affect me?

    A Rent Deposit Deed is akin to a bond that gives the landlord some security.

    It is a separate document to the lease and is usually requested by a Landlord when a new lease is granted to a tenant, especially if the tenant has little or no experience in the specific industry for which the property will be used, is not of sufficient financial standing in the eyes of the landlord to comply with the lease terms, or is a company that is either new or has been dormant for some time. 

    A landlord may also ask for a Rent Deposit from a new tenant who is looking to buy the remaining term of an existing lease again for the reasons mentioned above or any other reason specified in the existing lease.

    On completion of the lease or the assignment of the existing lease, the tenant via its solicitors will pay the sum required by the Rent Deposit Deed (this is usually around 3 times the monthly rent) to the Landlord or solicitors for the landlord to hold in a separate account.

    If a tenant defaults on the terms of the Lease (e.g. failure to repair) the Landlord will be able to use the funds paid under the Rent Deposit Deed to rectify the defects. There is often an obligation on the Tenant to top up the rent deposit amount if the Landlord does use any of the funds.

    In looking at how long a Rent Deposit Deed is to apply for, many Landlords request this to be for the same term as the lease.  It is recommended that the term be limited in some way, if possible, either in time or in connection to business turnover. 

    It is recommended that a tenant tries to resist entering into a Rent Deposit Deed as this is cash that will be tied up and which could be used for the business.  If the Landlord is insistent on it then try to negotiate on the rent deposit value and its duration.

  • I want to get out of my commercial lease – what can I do or what do I need to do?

    If you are looking to end your lease the first thing you need to check are the terms of your Lease to see what you can do.

    The three main ways to end your Lease are:

    1. Sell/assign the remaining term of the lease to a new tenant.
    2. Exercise a break clause.
    3. Surrender the lease back to the Landlord.

    Selling or assigning the lease may take some time as you will need to find a new tenant, go through the usual conveyancing process and the Landlord’s permission to assign is usually required  - the latter may involve additional costs and time.

    If looking to exercise a break clause, you will need to ensure you comply fully with all the terms of the break clause and the terms of the lease. Often, this involves giving a specified notice period so ensure you are aware of this and can adhere to it aswell as the other terms of the break clause and lease before deciding to exercise it.

    To surrender back the lease to the Landlord, you will need the Landlord’s co-operation. Unless the Landlord has plans for the property or has a tenant already interested in the property, then it is likely that the Landlord (if willing to accept a surrender) will request a premium to be paid and/or may involve you paying their legal costs to enable you to hand the lease back.

    It is important to consider the terms and conditions of the lease, the costs implications and time implications before deciding how you are going to try and get out of your Lease.

  • What does being contracted outside the Landlord and Tenant Act 1954 mean?

    "Contracting out a lease"

    It is common practice for leases of less than 5 years in duration to be “contracted out” (outside the Landlord and Tenant Act 1954) (“the Act”) meaning that there is no automatic right to a continuation of a tenancy at the end of the lease.

    Equally, a landlord would not be able to require the tenant to extend or renew their tenancy.  Leases over 10 years are usually protected within the Act.  For leases between 5 and 10 years, there is no normal practice and so your rights are subject to negotiation.

    Sections 24 to 28 of the Act apply, subject to conditions, to the renewal process of a commercial lease.

    If these provisions are to be excluded from the lease then the lease will be “contracted out” of the Act.  The correct procedure needs to be followed before the lease is entered into. At the end of the term the tenant is required to leave the property as required by the terms of the lease.

    If the provisions are excluded and a new lease is required then this will need to be negotiated and entered into prior to the first lease ending but there is no obligation on either party to do this so acting early will give you the most time to arrange your business affairs.

    When a lease is not "contracted out"
    If the lease is not “contracted out”, then the lease will be protected.  

    Being protected gives the landlord and the tenant a right to request a new lease be entered into once the first lease comes to an end, but there are some strict circumstances where a request for a new lease can be refused/rejected. There is no procedure to follow before the lease is entered into.

    Taking legal advice on whether you should agree to contract out/be outside the Act is recommended at the negotiation stage of the terms of a lease so that an informed decision can be made before you enter the Lease.

  • My commercial property lease is due to expire soon but I want to stay in the property – what can I do?

    Renting a business property with a lease due to expire? If you want to stay in the property you're in, you will need to check the terms of that lease.

    If your lease contains an option to renew, then you will need to ensure you comply fully with all the terms of the option to renew clause. This usually involves serving a notice (which may have to be in a specific form) within a specified time period and may involve payment of a fee.

    What if my lease does not contain an option to renew?
    Options to renew are rare.  

    If your lease does not contain an option to renew, you will need to check if your lease is protected under or contracted out of Sections 24-28 of the Landlord and Tenant Act 1954 (“the Act”). If the lease is contracted out of the Act then there are usually provisions within the Lease to this effect. 

    Prior to entering into the lease the Landlord or solicitor would have served a notice on you to exclude the provision of the Act and you would have either sworn a Statutory Declaration or signed a Simple Declaration agreeing to the Lease being outside the Act.  A copy of the Statutory or Simple Declaration is usually attached to the Lease. 

    If this is the case, then you have no right to stay in the Property after the end of the term.  If you want to stay in the property you will have to negotiate a new lease with the Landlord and that lease will have to begin immediately on the current lease expiring.  There is no obligation on the part of the commercial landlord to negotiate with you.  Therefore, acting in plenty of time before the current lease ends is key.

    If the Lease is protected under the Act then you will be able to remain in the property after the term ends unless the Landlord has served a notice requiring possession.  This is considered as “holding over”.

    Provided the Landlord has not served a notice on you for possession or offered you a new lease, if you want a new lease you will need to serve a specific notice on the Landlord requesting a new lease. 

    There are timescales which apply to serving a notice so it is recommended you get advice around 1 year prior to the Lease expiring.
    Don't hesitate to get in touch with our commercial property team on (0117) 9290333 to discuss any of this in more detail.

  • My Tenant wishes to transfer their lease. As a commercial landlord, can I refuse to give consent to the assignment?

    The first port of call should always be to check the terms of the lease - you should check the precise details and to clarify whether or not the tenant is permitted to assign or transfer the lease in the first place.

    If there is no mention of assignments or transfers in the lease
    If the lease is silent on assignments and transfers or parting with possession, then they can take place without the landlord’s consent - in this instance, you cannot refuse consent.

    If the lease does not allow assignments or transfers 
    If the lease contains an absolute ban on assignments or transfers, then there is no obligation for a landlord to consider a request for consent. However, if you are willing to consider it. you can impose whatever conditions you want to without the need to be reasonable.

    Licences to assign
    Most commercial leases do contain the ability for the tenant to assign/transfer their lease. 
    The lease will often specify conditions which will apply to the transfer/assignment for the current tenant and new tenant, what the landlord can consider for the consent to assign/transfer, and what additional conditions they can impose.
    The situations which apply to considering consent usually follow the lines of:

    (a)        if there is a current beach of the covenants in the lease;
    (b)        if there are any monies outstanding;
    (c)        if the conditions attached to the assignment/transfer are not being adhered to;
    (d)        if it is considered that the new tenant will not be able to comply with the lease covenants  (i.e. the ability to pay the rent) and
    (e)        if the current tenant will not pay your legal costs for considering the application.

    For new leases (i.e. since 1996). tenants are only liable for the period of their ownership. As such, Landlords usually request the current tenant to guarantee the new tenant for their period of ownership (called an Authorised Guarantee Agreement). 

    This will usually be incorporated into a Licence to Assign.
    For old leases (i.e. prior to 1996), there is no ability for the landlord to request that the current tenant guarantees the new tenant as this did not exist at the time. However, the original tenant of the lease will always be liable for the lease terms and subsequent tenants may also be liable.

    Remember an application for a Licence to Assign should be dealt with without delay and reasonably and if rejected then full reasons for the rejection given in writing and these should relate to the Landlord’s interest in the Property rather than the Tenants.
    To ensure the application is considered reasonably, consideration should be given to additional security such as the new tenant providing a Rent Deposit Deed or guarantors being given for the new tenant (either by new guarantors and/or the current tenant).

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News

Commercial Landlords: Property redevelopment points to consider

October 12, 2016

In a recent County Court case, the court considered whether the rights of the landlord to develop its property were in conflict with the building’s Right to Manage Company (RTM).

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