When businesses look to take a commercial lease of a space there are some key aspects to consider at the point of agreeing heads of terms with the landlord.

Demise

Are you looking to agree terms to take a lease of the whole of a building or just part of the building? This difference is key when considering your repair liability.

If you take a lease of a whole building you will usually become liable for the upkeep of the structure, including the roof. If you take a lease of a part of the building, the landlord will usually retain liability for the repair of the structure but will pass a proportion of the costs of the upkeep of this to you through the service charge. 

Repair

A commercial lease will usually require a tenant to keep the agreed demise in a good state of repair regardless of the condition of the date you take occupation of the building.

In order to reduce your liability you may be able to agree with the landlord that you are only required to return the property in the same condition as you took it. This will need to be agreed with the landlord at the earliest point in the negotiations. 

Alienation

This is lease jargon and translates to give you the right under your lease to either sub-let or to assign the lease to a third party. If you sub-let the property you will grant a lease to a third party who will pay rent to you, however you will continue to be liable to pay rent to the landlord. If you assign the lease the third party will pay rent directly to the landlord.

The landlord will usually attempt to limit the circumstances in which you can either sub-let or assign but agreeing terms which are advantageous to you will increase your flexibility if you wish to leave the property before the lease ends.

Break options

When you agree terms for a lease these will include a fixed term. By agreeing a break clause this will allow the lease to be brought to an end prior to the fixed term date.

It’s important to note that break clauses usually contain a condition and can be for the benefit of both landlords and tenants. It is extremely important that the conditions of any break are considered carefully to avoid a dispute arising with the landlord at a later date.

Alterations

A landlord will usually try to limit a tenant’s ability to alter a premises and most leases will attempt to prohibit any structural works for obvious reasons.

Most tenants will want to carry out some fit-out works when they first take a lease and it is important to make the landlord aware of these at the earliest point to check they are agreed in principle. Landlords will often require detail of these works to include a written specification and a layout plan.

Stamp duty

Many businesses aren’t aware that in addition to stamp duty being payable on freehold purchases it can also be payable on leases.

If you require more information on this please contact us with details of the terms and rent payable and we can advise on any stamp duty liability.

If you have any questions regarding any aspect of commercial property, please contact Frances Watts, Rebecca Cardy or Karen Brown in our commercial property team for further assistance on 01189 209 499