Solicitors in Leeds

COMMERCIAL PROPERTY FAQS FROM LEEDS SOLICITORS

My Tenant is behind in his rent what can I do?

There are a number of options but we would recommend firstly considering whether anyone other than the current tenant may also be liable. This could mean a previous tenant who remains liable or a 3^rd party guarantor.

If only the existing tenant can be pursued you must decide if you want to take action to repossess the premises.  In the current market, many Landlord’s are unwilling to do this as they feel that they will not be able to find a new Tenant and do not want to find themselves not only not receiving any rent but also being liable for the business rates and other outgoings such as insurance and security costs for the premises.

If you do not want to repossess then you may as an alternative get bailiffs to attend the premises and seize sufficient goods or take action against the Tenant or sue for the debt at court, but it is important t to remember that if the tenant simply does not have the money to pay, a court judgment will not result in payment and will cost further money to obtain. It is also worth bearing strongly in mind that if you decide to let the tenant remain in occupation whilst not paying rent. It is important to ensure that this is not considered to be a variation of the lease or a waiver of any breach. It is important to handle such a situation carefully, and legal advice may be prudent.

Which items in a lease are worth negotiating on from a tenant’s standpoint ?

The starting point is to remember that, essentially, everything is negotiable.  Landlord’s agents and/or lawyers will often suggest that certain clauses in leases are mandatory or standard. This is not the case, so don’t be afraid to negotiate. Much of course depends on each party’s negotiating position and prevailing market conditions.

• Resist paying the landlord’s legal costs – it’s not standard practice.
• Ask for a rent-free period – you’re likely to get it in the current market and it improves your cashflow for a few months (especially important if you are a new business).
• Rent is usually payable in advance so try to negotiate payment of rent monthly rather than quarterly.
• Ask for a break clause (a right to end the lease early). It provides important flexibility and is an easier way out of a lease than trying to sell it on or subletting.
• If the premises are in anything less than perfect condition insist a schedule of condition is prepared. This will detail any items of disrepair already existing at the start of the lease so that you don’t have to foot the bill for these repairs.
• Agree any signage and initial alterations before signing the lease. Waiting until after the lease has been completed, you may be required to complete a formal licence and pay the landlord’s legal and surveyor’s fees.
• Ask for the lease to be the name of your limited company (if you don’t own one then you can form one for very little cost for this purpose) and offer a rent deposit rather than guarantees if the company cannot provide adequate references.
• If there is a service charge, request that it be capped.
• If the rent is to be reviewed during the term of the lease then ask for an upwards-downwards review rather than upwards only.
• If the value of your business is linked to the location of your premises (eg shop, restaurant) then consider asking for a longer lease and strongly resist the landlord removing your statutory right to renew the lease at the end of the term especially if you plan to sell on your business as a going concern once you have built it up.

Can a lease be terminated early by the landlord?

In certain circumstances, yes, generally :-

• If there is a break clause exercisable by the landlord
• If the tenant breaches any of the terms of the lease then the landlord can forfeit the lease.
• If the tenant becomes insolvent the trustee in bankruptcy (or liquidator as the case may be) may well have the right to disclaim the lease

What is a break clause?

The lease may contain a clause which provides that either landlord or tenant or both can bring it to an end early on giving appropriate notice.

What kind of practical matters should I consider if considering taking a new lease ?

• can you sublet all or some of the space?
• can you access the building whenever you like or are there restrictions?
• how secure are the premises? Are there CCTV cameras and alarm systems, are there physical entry barriers? Can you put them in if you feel you need them?
• do the premises provide a suitable working environment for you and your staff?
• Are there any hidden or unknown costs in the lease ?
• Is there a possibility of more space if your business grows ?