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Landlord and Tenant – Getting the Lease Right
Adams’ Litigation Department is where clients come to when things go wrong and their legal rights have been breached – our landlord and tenant solicitors in East London have a great deal of experience in acting for a number of commercial landlords who have come to us for help to resolve disputes between them and their tenants. In several of these cases the landlords have not consulted with a solicitor when preparing the lease for their tenant, either basing it on a previous lease or a template found on the internet. The danger with this approach is that it may include or omit provisions in the final lease which were not intended by the landlord and his tenant, leading to the disputes which solicitors then have to step into to rectify. Common problems I have seen in my work recently are as follows:
Unlike with residential leases, commercial landlords are able to change the locks and evict their tenants if they fail to pay the rent or breach their other obligations without having to get a court order for possession of the property. However, the landlord’s right to forfeit the lease must be contained in writing in the lease document, and the necessary notice procedure then followed. If this is not dealt with in the lease, then it could result in expensive court proceedings whilst the landlord attempts to get the tenant out and the tenant continues to not pay rent or cause other damage to the property.
2. Rent review
Commercial leases are often granted over a number of years and it is important if the landlord is to get a good return from the property that he is able to periodically increase the rent to take account of inflation and other market influences. If a properly-worded rent review clause is not included in the lease then the landlord will be unable to do this and he may find himself making a real loss on the property if he is stuck with the same rent over a period of 20 years or more.
3. Repairing Obligations
It is very important that the lease clearly defines who has responsibility for repairing and maintaining the property. It is the tenant who has exclusive possession and use of the property and normally the landlord will want the tenant to keep the property in good repair and return it to the landlord in the same condition at the end of the lease as at the start. However, if the lease does not explain this in the correct language then this can again lead to a lengthy and expensive court claim whilst the property continues to deteriorate in condition with no-one taking responsibility for its upkeep.
4. The Landlord’s Costs
Another perk of being a landlord is that you can put it in the lease that the tenant has to cover your legal and other costs incurred on a variety of consents and variations to the lease, and even your bailiff’s fees if you need to recover rent arrears or evict the tenant. However, you are again only entitled to these costs if the lease expressly provides for this and we have seen numerous situations where the landlord has missed out on recovering these fees because of a missing or poorly-drafted costs clause.
5. Security of Tenure
A special characteristic of commercial tenancies is that the law says the tenant is usually entitled to remain in the property and request a new lease from the landlord once the old lease has come to an end. The landlord can still seek to avoid granting a new lease, but only on limited grounds by following a formal notice procedure which the tenant can object to, resulting in lengthy proceedings whilst the court decides which party is entitled to possession of the property. This can all be avoided at the outset if the landlord states that such security of tenure is not to be a condition of the lease, but again this involves a formal procedure which many landlords do not know how to carry out correctly without legal advice.
The above issues go to show why you should obtain competent legal advice from a solicitor before leasing out your business premises to a tenant – for the sake of saving a few hundred pounds on a properly-drafted lease you could expose yourself to thousands of pounds of unnecessary legal costs or damage to your property. Our Conveyancing Department is on hand to provide you with full advice at every step of the way in preparing and executing your lease, to help you avoid crossing the corridor to see our litigation team later on!