Most businesses require some sort of premises to work from. Commercial property can include retail units, offices, workshops, garages, factories or storage facilities. While some businesses own the premises they operate from, most occupy under a lease paying a market rent. However, there is much more to a commercial lease than just the payment of rent.
As well as the rent payable, it is not rare for commercial leases and agreements to contain pages of detailed requirements, all of which will affect the Tenant named in the lease.
The lease, which is often in favour of the landlord, can enforce a number of tedious obligations on Tenants, some of which may not be even-handed. Furthermore, property legislation has a big impact on the Tenant using the property. Consequently, it is important for commercial lease tenants to seek solicitor’s advice in order to fully comprehend their rights and obligations before signing a commercial lease.
What is a commercial lease?
A commercial lease is a legally binding contract made between a landlord and a business or commercial tenant. The lease gives a tenant the right to use certain property for a business or commercial activity for a period of time in exchange for rent paid to the landlord. Additionally, the commercial lease contract stipulates the terms and conditions of both the landlord and tenant during the lease period.
What are provisions commonly dealt with in a commercial lease?
A commercial lease typically deals with the following:
- the type of property being let, i.e. office, unit, container, garage, etc;
- the full address of the property being let;
- the term of the tenancy and whether the tenancy is for a fixed term or renews continually;
- the amount of rent payable, frequency, monthly or weekly for example and when the date that rent should be paid;
- the type of business or trading that is permitted to be conducted on the premises;
- who is responsible for any leasehold improvements; and
- the necessities of any security/damage deposit.
In addition, a commercial lease may also ascertain the following:
- requirements for lease renewal;
- landlord improvements and signing incentives;
- tenant leasehold improvements;
- information on if the tenant can assign or sublet the property:
- notice periods for termination of the tenancy; and
- insurance provisions.
What is the governing law of my lease?
The governing law is the jurisdiction where the property is located, irrespective of the jurisdiction where the landlord and tenant live.
Who are the parties to the lease?
The parties to a lease are the landlord and the tenant. The lessor possesses the property and permits the lessee to use the property in trade for monetary payments called rent.
What is a guarantor or surety?
A guarantor or surety is a selected individual who approves to pay any losses directly to the landlord should the tenant be incapable to pay the rent, or else breach the tenancy agreement.
The Leased Premises
What are fixtures?
In real estate jargon, the word “fixture” refers to a piece of property that is appropriately attached to the Premises so that to move or remove it would damage the property. Examples of fixtures may include built in cabinets, sinks, toilets or wall-to-wall flooring.
What are chattels?
Chattels are personal property. They are dissimilar from fixtures in that they can be moved from one location to another. Examples of chattels may include rugs or curtains, microwaves, washing machines, refrigerators, desks and computers.
What are leasehold improvements?
A leasehold improvement is a cost incurred for the long-lasting improvement to the leased property. They are contemplated fixed assets and deflate in value over the period of the lease.
How is the tenant allowed to use the premises?
The tenant may use the commercial property for purposed stipulated in their lease under the “permitted use of premises” clause. If they want to use the property for additional purposes then they will require written consent from the landlord of that commercial property.
The Lease Term
What does “Automatic Renewal” on my commercial lease mean?
Automatic renewal means that the lease remains open-endedly on the agreed period (weekly, monthly, or yearly) until either the tenant or the landlord gives notice to the other party that they will be terminating the lease.
The pitfalls of signing a lease without legal advice:
Many Commercial Lease Tenants who have not been represented by a solicitor to enter a lease without finding out the magnitude of their obligations under the lease.
- You may find that as the tenant of said commercial lease, you are agreeing to repair the property in a better state than it was at commencement of the lease at your own cost. Dilapidation claims brought by the Landlord can be extremely expensive so Tenants are urged to understand the standing before entering into the lease.
- The tenant may be stuck in a contract that they only wish to take out for a minimum term, but due to automatic renewal and lengthy notice periods, could potentially be stuck.
Contact JMR Solicitors to have your commercial lease checked before signing
It is vital that you get a solicitor to check your commercial lease and the responsibilities you are agreeing to under the lease before you sign.
For a commercial lease solicitor in Manchester, with vast experience dealing with Commercial Lease clients, contact us on 0161 491 3933 or email email@example.com