Negotiating the terms - valuable guidance for tenants

13 Jul 2010

Agreeing the terms of a lease with a landlord will save both time and money further down the transaction. If both parties are fully aware of the terms of the agreement it is likely to reduce disputes and avoid delays and unnecessary legal costs.Below is a non-exhaustive list of the points that should be considered:

The term should be fixed for a set period.
Leases with terms greater than 7 years have to be registered at the Land Registry. This will mean Land Registry fees and accurate plans having to be prepared. Stamp duty may also be payable for leases with high rents and long terms.

Consider the initial rent and whether there is to be provision in the lease to increase the rent. If so, when and how is the rent to be increased?
Depending on market conditions landlords may offer a rent-free period as an incentive to prospective tenants.

The service charge is often a contentious issue whenever a property is divided between two or more tenants. It includes such items as lighting, cleaning common parts, repair and maintenance, security etc.

The service charge can be dealt with by way of an all-inclusive rent or by apportioning the charge between each of the tenants.

Try to obtain a complete list of the services the landlord provides and copies of any previous years service charge accounts.

The repairing obligations in commercial leases can be particularly onerous. The landlord can require you to put the property into a good state of repair and condition regardless of the condition it was in when you took on the lease.
To limit your obligations and minimise the costs, ask to limit the repairing obligations by referring to a photographic schedule of condition. This means you won’t have to put the property into a better state of repair then that shown in the photographs.

Most landlord’s will not want the tenant to assign (transfer/sell) the lease without their consent. This gives the landlord the opportunity to decide whether the new tenant is suitable and has the adequate resources to meet the rent.

If a landlord is prepared for you to assign the lease then they will often make it conditional upon you guaranteeing the incoming tenant.  If you are not prepared to provide such a guarantee then you should make sure that this is addressed from the outset.

This Act preserves the right of a business tenant to stay in the property at the end of the lease and to apply to the court for the grant of a new lease.
This legislation applies automatically for business tenants but be prepared for landlord’s attempts to exclude it.