If you are negotiating the terms for a commercial lease, then it is recommended that you consider addressing the following list of matters with the other party:
Â -Â Â What will the lease Term be and when will it commence?
Â -Â Â How much Rent will be payable? When, how and to whom is it to be paid? Will it be subject to VAT?
Â -Â Â Will there be a Rent Review? If so, how often and will it be based on ‘market rent’ or ‘index-linked’ (subject to inflation)
Â -Â Â Will Service Charges be payable by the Tenant to the Landlord? If so, then how will these be calculated and how often will they be payable?
Â -Â Â Will there be a Break Clause? If so, when will it be exercisable and by whom (the tenant or landlord, or both)?
Â -Â Â Will a Rent Deposit be payable? If so, then how much? This is held by the landlord as security against non-payment of rent or breaches of the terms of the lease, and is usually based on various factors, such as the (lack of) a Tenant’s references and the amount of risk for the tenant failing to pay the rent or breaching the terms of the lease.
Â -Â Â Will the Landlord require a Guarantor for the Tenant? This is someone who will take responsibility for the Tenant’s debt or obligations and guarantees that these will be paid or carried out. The Guarantor will also sign the Lease.
Â -Â Â Will the Tenant have a right to renew the lease at the end of the term? The Tenant has a statutory right to renew, under the Landlord and Tenant Act 1954, unless the Landlord can rely on specific grounds to the contrary. Both parties may expressly agree this will not be the case, by service of a notice and the making of a declaration by the Tenant. This is done by following a prescribed procedure under the above Act for it to take effect.
Â -Â Â What Rights will the Tenant have in relation to the premises? Such as, which activities can the Tenant carry out at the property? does the Tenant have a right of way over shared or communal areas to access the premises? will the Tenant benefit from a right to uninterrupted use of the premises?
Â -Â Â What Rights will the Landlord reserve in relation to the premises? Such as, the Landlord’s right to inspect the premises to make sure the use of the premises is in line with what was agreed.
Â -Â Â Will there be any Restrictions in relation to the premises that affect either party? Such as, certain uses the Tenant must not carry out at the premises.
Â -Â Â Will the Tenant be allowed to Sub-let or Assign the lease? If so, then will there be a procedure for this? (i.e. will consent be required from the Landlord?)
Â -Â Â What will be the obligations of each party in relation to the premises? Such as, who will be responsible for repairing and decorating the interior, exterior and structure of the premises? who is responsible for insuring the premises?
Â -Â Â Will there be a Schedule of Conditions prepared and attached to the lease before the term commences? If so, then who will pay for this? This records the condition of the premises before the lease starts and allows the Tenant to return the premises at the end of the lease in the same state.
Once the above matters have been considered, the parties can then proceed with preparing the agreed Heads of Terms document.Â
If you would like assistance, then please contact our Commercial Property department and speak to one of our team who will be happy to guide you and assist you.