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Top things to think about before you sign a commercial lease for your business
In a rising market with good commercial property becoming harder to come by on favourable terms, there is a temptation to complete a lease quickly without the benefit of legal advice to avoid losing the property or suffering an increase in the rent. All too often we are asked to advise on matters where tenants have entered into leases without fully understanding the wider reaching implications of doing so and it’s only when there is a sudden downturn in business, or their circumstances change, that they realise they are contractually bound and there is little that can be done to get them out of it.
In the majority of cases, a commercial property deal will be one of the most valuable transactions you will complete in your lifetime and it is therefore imperative that you are fully advised before jumping in with both feet.
So why is it important to obtain proper legal advice before committing yourself to taking a lease of a commercial property and what sorts of things do we look for when advising our clients?
- What name is the lease being taken in? If the lease is being taken in the name of a company, does the Landlord require any additional security such as a rent deposit deed or a personal guarantee from one of the directors? Does the director understand what this means and the extent of their personal liability?
- What are the repairing obligations in the lease? If the lease is being taken on a fully insuring and repairing basis, do you understand what this means in practice and the risks of taking a property with existing wants of repair where your repairing obligations are not limited for example by way of a schedule of condition?
- If there is the ability to break the lease before the end of the term, are the terms of the break capable of compliance? Is there an ability to recover any overpayment of rent?
- Has the lease being excluded from the security of tenure provisions laid out in Section 24-28 of the Landlord and Tenant Act 1954 which allow a tenant to request the grant of a new lease at the end of the term? Is it important to the operation of your business that you have the ability to request a new lease from the Landlord?
- How much Stamp Duty Land Tax (SDLT) is payable on completion of the lease? Are you able to comply with the 30 day filing requirement imposed by HMRC to avoid a fine?
- Is the lease compulsorily registerable at the Land Registry? Are any plans attached to the lease Land Registry compliant?
Franklins Solicitors LLP have an experienced team who can guide you through the negotiation of a new lease and assist you with completing the same. Should you have any queries in relation to the grant of a new lease or any other type of commercial property transaction, please contact Jo Pusey and her team on 01604 828282 or 01908 660966 or e-mail jo.pusey@franklins-sols.co.uk .