Your key questions answered

My property has a low EPC rating – will that cause any problems for me granting a commercial lease?

Generally speaking, it is unlawful to grant a lease of substandard property. This means a property whose energy performance certificate shows an F or G rating in respect of energy efficiency. There are some exemptions to the rules, for example, where the energy improvement works would devalue the property. Potential penalties for non-compliance are the issue of fines to landlords and the entering of details of the breach on a public register. Landlords should also be aware that the minimum rating of sub-standard property may well change in the future, exposing more properties to the regulations.

What are the risks of taking a commercial lease of property in a poor state of repair?

A commercial lease will contain a number of obligations that expose business tenants to liability for repairing a property, either directly, through obligations to repair the property, or indirectly, by requiring a business tenant of a multi-let building to contribute to the upkeep of the building via a service charge. Business tenants should ensure that they carry out surveys and enquiries at an early stage to assess their potential liability for repair and service charges and, if necessary, limit their liability through the lease terms.

How can I ensure that my commercial lease acquisition proceeds quickly and cost-effectively?

Some transactions involving the acquisition or disposal of commercial leases become delayed or expensive due to protracted negotiations over lease terms or where problems with the property are encountered during a business tenant’s investigation of the property. We find that legal negotiations can be minimised if the parties agree clear terms at the outset. Commercial landlords can also avoid issues arising during a business tenant’s investigations by reviewing their portfolios to ensure that any issues are resolved before the process of granting the commercial lease begins.

What are my options if my business changes and I no longer need my commercial lease?

In these circumstances business tenants will want to check their commercial leases for break options – unilateral rights to terminate the lease on a particular date. Alternatively commercial leases can often be assigned, or the property sublet in whole or in part, to mitigate the cost of the lease. In such cases however be aware that the landlord’s consent is usually required for assignment and subletting. The landlord may also agree to accept a “surrender” where it takes the commercial lease back (although landlords cannot usually be compelled to agree to this approach and may require payment to do so). We would always recommend considering the inclusion of break rights when you are negotiating the terms of the commercial lease and taking legal advice should your commercial lease no longer be required.

My business has a lease of commercial property. Do I need consent from my landlord to transfer my lease, underlet the property or carry out alterations?

Most leases of commercial property set out in detail the circumstances in which the tenant can transfer the leases, grant underleases or carry out alterations.  The consent of the landlord will usually be needed but there may be a requirement that this consent cannot be unreasonably withheld.  An application to the landlord for consent will be needed and, if the landlord is willing to give consent, the terms of a formal “licence” will be negotiated.  External or structural alterations are often prohibited; whether this is the case will depend on the nature of the property and the terms of the lease.

Is the tenant responsible for the landlord’s costs in handling an application by the tenant for consent under a lease of commercial property?

Usually yes if the application is made during the term of the lease.  The landlord’s solicitors will often require an undertaking from the tenant’s solicitors to pay those costs. If consent is being sought for initial fitting-out works then it would be more usual for the parties to bear their own costs.

As a landlord of commercial property will my tenant remain liable after the tenant transfers the lease?

In leases of commercial property granted since the start of 1996 tenants are usually released from future liability when they transfer their leases.  However, a lease can require an outgoing tenant to enter into an “authorised guarantee agreement” when transferring the lease where the outgoing tenant guarantees the obligations of the next tenant.  This point should be agreed at heads of terms stage.

Is the liability of the tenant to the landlord under a lease of commercial property affected if the tenant grants an underlease?

Usually not. The tenant would remain liable to the landlord under the provisions of the “superior lease” (i.e., the initial lease granted by the landlord to the tenant). There will be a separate party (the undertenant) in occupation of the property paying rent to the tenant under the new lease granted by the Tenant (the underlease).

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Andy Meatcher
Ian Narbeth

Recent work

Commercial Real Estate

Ongoing management of £30m property portfolio

We provide extensive ongoing advice to multi-million-pound property portfolio. Our advice covers all aspects of property management and ownership, including dilapidations, new leases and lease renewals, rent reviews, possession, forfeiture, alterations and advice on renovation and redevelopment works.

Commercial Real Estate

Advising purchaser on property aspects of acquisition of substantial care and treatment company

We provided property and planning support in connection with the acquisition of a specialist care, education and treatment company. A large team from across the firm carried out property and planning due diligence and reporting and identified and resolved title issues. We also provided support to other firms of solicitors involved in the transaction, successfully working with various advisers acting for our client on the transaction. The complexity of properties and a demanding and shifting timetable made the task challenging. Our close cooperation with another firm of solicitors involved in the transaction was vital to the success of the deal.

Development and Regeneration

Acting for purchaser of development site with planning for new homes

The site had been on the market for some time and there had been a number of aborted sales due to complex conditions on the planning permission. The seller required the client to exchange contracts within four weeks. Working with our planning law experts we were able to provide a detailed summary of the planning issues giving the client confidence to proceed. We were then able to meet the seller’s four-week deadline for exchange

Acting for seller of prestigious hotel and restaurant venue

We acted in a complex transaction which involved the sale of the hotel site in two parts, one to the end user and the remainder on a back-to-back sub-sale to the end user via a developer. The involvement of three parties in the sale of this complex transaction presented a number of challenges that the firm was able to successfully navigate. The disposal of this asset for our client was Important for their long term strategic goals.

Unconditional purchase of a dwelling with planning permission for construction of six new houses by way of sub-sale

Under pressure from the seller to complete the transaction, our real estate team quickly identified that the site being purchased was affected by rights in favour of adjoining land. We exchanged and completed a deed of release of these rights with the adjoining owner and simultaneously exchanged on the purchase within four weeks of being instructed.

Advising on acquisition of a single dwelling for demolition and rebuild

This is a good example of where our development team provides value to clients at the outset of a transaction by highlighting key title issues that may affect the client’s plans for the site. Here we identified that the site had inadequate access and service rights over third party land. This would not normally be a barrier to development. but investigations highlighted that the adjoining owner was going to be very difficult to deal with and would use the title issues to try to acquire the site themselves at a reduced price. The client elected to walk away and invest their time/effort in a less risky project.

Long-term commercial, IP, IT and data protection advice

We have worked with our client for over 16 years acting as an outsourced in-house legal function for all business and day to day legal matters, supporting on all commercial, employment issues and property matters. Our ongoing legal support helps to minimise risks across the business.

Extensive property holdings

Acting for a Diocese in relation to its extensive property holdings, including drawing up conditional contracts for development sites, some of which have a provision for payment of overage.

News and insights

Managing commercial property risk in the world of remote working

Adrian Scales, Head of Real Estate London, discusses the rise in vacant properties and the effect of hybrid working on commercial property premises, including the obligations of both the landlord and the tenant.

Impending passing of the Renters (Reform) Bill spells trouble for tenants and landlords

Media spotlight

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Ian Narbeth shares his insights with Property118 on the potential impact of the Renters (Reform) Bill  for tenants and landlords

Ian Narbeth

17/05/2024

How to convince your employer to let you work from home

Media spotlight

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Greg Burgess shares his advice with the Telegraph on how to get your flexible working request approved with your employer

Greg Burgess

14/05/2024