Tenants Beware: Take Legal Advice When Agreeing Commercial Leases

    One of the most valuable pieces of advice to be offered to prospective tenants looking to take on a commercial lease is to acquire the advice and assistance of a suitably qualified legal professional before agreeing the heads of terms with the landlord or the landlord’s agent.

    Heads of terms is the name given to the documents, usually drawn up by the landlord or their agent, which sets out the terms of the commercial lease agreement between the tenant and landlord. A hugely significant agreement then that any prospective tenant would be imprudent to enter without seeking sound legal advice.

    There are a number of standard and obvious points such as the length of the term and the rent amount, the heads of terms also set out other important matters that relate to what has been agreed between the tenant and landlord.

    The difficulty from the tenants perspective in signing these heads of terms is that whilst they may not be legally binding, if the tenant has agreed to what is stated on the heads of terms at the commencement of the lease and then subsequently encounters a problem with the lease, the tenant may be faced with a landlord stating that the tenant agreed to the heads of term yet is now trying to renege on the deal.

    This kind of situation not only creates a bad atmosphere but can ultimately lead to the collapse of a lease deal because the tenant did not fully understand the terms or did not ask their solicitor to negotiate for what they needed before agreeing the final document.

    Common yet significant points that tenants often miss out in the heads of terms include;

    • limiting the repair obligation to a schedule of condition,
    • capping the service charge,
    • seeking warranties on a new build,
    • making clear that any break clause is not conditional on matters which the tenant has little control over or which are unreasonable,
    • not referring to the tenant’s fit out works,
    • not agreeing that the lease be excluded from the protection built into the Landlord And Tenant Act 1954.

    This last point is particularly important because the tenant will lose their ability to remain in the property at the end of the agreed term if the lease is excluded from the Landlord And Tenant Act 1954. It is surprising how often tenants unwittingly give away this right without realising they are doing so, only to face a ransom situation at the end of the term by the landlord who insists on unreasonable rent if the tenant wishes to remain. There is then little the tenant can do about it, the only option being to leave often at great cost.

    Considering the complexities involved, if you are in the process of taking on a commercial lease, seek legal advice as soon as possible to protect your interests. At LawBid you will find expert commercial lease solicitors ready to provide you with competitive quotes to meet your individual circumstances. Register or log in at www.lawbid.co.uk today to find your perfect solicitor.

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