New Lease (Landlord)
New Commercial Lease (Landlord)
As a commercial landlord you will be familiar with offering your premises for lease to suitable tenants.
The lease is usually for offices, retail units, shops, manufacturing factories or industrial units. A lease tends to be for a fixed term of years although this term may vary depending on the deal you have agreed with the tenant. You may be renting out the property as a company, partnership, individual or self investing pension fund (SIPP). More often than not, the tenant will be responsible for your legal costs, as landlord. However, recent economic changes have meant that this is not always the case.
In most circumstances the lease of a commercial property will be a business transaction and, like all business transactions, it is important to ensure you secure the right price for the legal work which will be carried out on your behalf.
Whether a landlord or a tenant, using a specialist commercial property solicitor can be invaluable in ensuring a smooth, efficient leasing process that meets the requirements of both parties.
Leases typically have agreements of between three and 25 years and can offer long-term stability. However, lease lengths are getting shorter and recent research suggests that the average length of a business lease is below eight years.
Lease length will be just one of the key areas of the contract negotiations for both sides. Other areas include:
- Rent and payment schedules
- break clauses
- service charges
- dilapidations (an amount payable to the landlord at the end of the lease)
- responsibility for maintenance and repairs to the building and external areas
Rent is usually paid quarterly in advance. However, tenants may be able to pay monthly and this can form part of the negotiation process. If your business is new, you may want to consider a short lease of three years or less or ask for a break clause.
It’s important for both sides to be clear on service charges – how much these are and what services they cover, such as cleaning and heating. Tenants have the right to challenge service charges.
Tenants also have the right to remain in occupation of the premises and renew the lease once it expires, unless there has been previous agreement between the two parties. However, there are specific cases when the landlord can refuse to grant a renewal.
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