A Tenant’s Guide to Commercial Leases: Part 1

Naomi Wilson, Director and Solicitor in Astle Paterson’s Commercial Department sets out a guide to Commercial Leases from the perspective of a tenant.

Naomi said “The prospect of signing a lease for business premises can be a little daunting for a first time tenant.   Here at Astle Paterson (Solicitors in Burton upon Trent) we guide you through the process, explaining each step to you until the lease completes and you move in.

The first step is to agree the terms of your lease.  This will usually be done via a commercial agent who has advertised the property on the letting market for the Landlord.  Once agreed, those heads of terms will be sent to both your solicitor and the solicitor representing the Landlord.

Heads of terms detail the length of the lease, the annual rent payable, the extent of the premises to be leased and any other provisions agreed, such as break clauses or rent deposits etc.

Once in receipt of the heads of terms the Landlord’s solicitor will prepare a number of documents which will then be sent to the Tenant’s solicitor for consideration.

In addition to the draft lease (which will ideally incorporate a plan showing the extent of the land/premises being let) the Landlord’s solicitor will also supply the following paperwork:

1. Evidence that the Landlord owns the premises and is entitled to rent them out to the Tenant.  This will usually be by way of a copy of the Land Registry title to the premises and the official Land Registry plan.  The title will also confirm the existence of any necessary easements that the Tenant will require in order to use the property (such as rights of way over private roads on an industrial estate or rights to use the services for example);
2. Replies to a set of standard commercial property enquiries designed to provide all the information about the premises that a Tenant needs to know before signing a lease (such as items that will be left in the property for the Tenant to maintain, the existence of asbestos, building work that has been completed at the property, the rates payable and the planning permission in place for its use); and
3. Other ancillary paperwork such as evidence that the Landlord is registered for VAT (and so can charge VAT on the rent) and proof that he insures the building (and can validly require reimbursement of the annual buildings insurance premium from the Tenant).

The lease itself will include a wide range of provisions (including those agreed via the Agent) but will mainly comprise Tenant’s covenants and obligations.

Copies of the replies to commercial enquiries will be sent to you by your solicitor together with the lease and any other relevant paperwork.

At Astle Paterson we will also supply you with a lease report which is a comprehensive explanation of the main terms of the lease and how they will affect you on a day to day basis.  This also gives you an opportunity to raise any queries you have and to check that the content of the lease accurately reflects the terms you agreed with the Landlord.

We also always advise Tenants on the benefits of carrying out searches before they sign their lease.  This is because it is extremely important to have all available information on the property to hand before making a decision about whether or not to proceed, especially given the covenants and obligations placed on a Tenant in a lease.”

Please come back on 12th August 2014 to read the second instalment of Naomi’s guide.

If you are a Landlord or a Tenant and have any questions about the Commercial Lease process or you would like a quote from our Commercial team, please do not hesitate to contact us on 01283 531366.