Leasing Business Premises

Commercial premises are an important asset both for landlords and tenants: the former can use a well-situated property as a profitable revenue stream when rented out to a budding or well-established enterprise; and the latter can establish themselves as a growing business or develop an already existing commercial venture.

The business of entering into a commercial lease – either as a landlord or a tenant – is also something that should be handled with utmost care. Like many other kinds of deal, a commercial lease is in fact a contract that will be entered into between two parties for a specified time. It is important that the terms of this specialised contract are negotiated and set down clearly, to avoid unnecessary disputes and allow parties to take advantage of a mutually beneficial relationship.

At NA Legal, we are proud of our work in assisting clients, both landlords and tenants, to enter into agreements for the use of commercial property. If you need advice from a solicitor on a commercial lease, or would like to instruct someone who is skilled in negotiating terms that are sensitive to your commercial needs, NA Legal are here to help.

What is a commercial lease?

A commercial lease is essentially a special kind of contract to do with the use of property. When properly negotiated and drafted, a commercial lease will set out the details for letting out a property. It will cover a range of different things, including:

• The rent and how it may be increased;
• The rights and obligations of the landlord and tenants;
• The term (duration) of the lease;
• Repairs and who pays for them;
• Services and facilities for the premises;
• How the property can be used;
• Insurance, taxes and outgoings.

Regardless as to whether a property is sought for use as a retail store, an office, a restaurant, a bar or any other commercial purpose, the terms under which it is being used will need to be set down clearly and specifically in the lease.

 As with most kinds of contract, there is very little regulation of commercial leases. The law has been designed in such a way as to allow parties – landlord and tenant – to enter into negotiations to agree terms that are to their mutual satisfaction. This is why it is important to have the assistance of an experienced lawyer in agreeing terms.

How is commercial rent dealt with?

Commercial property is a valuable asset, and a landlord will normally look to take full advantage of this. Tenants must respect this fact, especially considering they are gaining use of the property for their own commercial benefit.

Following agreement of the level of rent for a property, a lease will normally have some provision for what is known as rent review. This is a specific point in time (or various occasions over the life of a lease) where rent can be revisited to reflect the changing commercial environment. In most cases, a landlord will seek to increase the level of rent that is due to them. This is, however, something that can be negotiated between the parties in creating a lease.

What happens if business needs change?

Most landlords and tenants will approach a lease for a property with a degree of pragmatism. It is not uncommon for a tenant to want to develop their business, which may call for some changes to be made to the landlord’s property. In creating a lease, it is possible for parties to agree the basis for which a property can be altered. That being said, a landlord will not be acting unreasonably if they require that their consent be given to certain proposed changes to their property.

As was mentioned earlier, a commercial lease is a breed of contract and the parties need to keep this in mind when negotiating and/or entering into one. It is also not uncommon that changes to a property may also require that the necessary insurance is sought, or that the property is reinstated to its original condition as a condition of permission for alterations.

It is also important to have due regard for the duration of a lease, and to consider allowing parties to terminate a lease in certain circumstances. Making use of a so-called break-clause, can often increase the attractiveness for tenants to enter into a lease, and gives parties a degree of flexibility in terms of how long they want to be committed to a contractual relationship.

How do you guard against possible commercial leasing disputes?

There are a variety of disputes that can arise as a result of entering into a commercial lease. Arguably one of the most common relates to the repairing obligations that the parties will owe to one another in the event that the property is damaged during the operation of a lease. This is why it is advisable, in negotiating terms, to agree for the condition of the property to be documented before the lease takes effect.

Taking note of the condition of the property allows the landlord and tenant to be clear on their responsibilities in terms of caring for the property over the duration of the lease. This is done by use of a Schedule of Condition. In ordinary circumstances, a lease will require a tenant to put the property back into the condition that they found it before the lease expires. However, this can result in disputes arising between landlord and tenant when there is ambiguity on the level of repair that is needed. This can all be avoided by both parties agreeing to make use of a Schedule of Condition.

It is important to point out that in most cases, the condition of commercial property will be a material consideration for both landlords and their tenants. Both parties should take care to set out their responsibilities in very clear terms, thereby reducing the likelihood of unnecessary disagreements or conflict.

Specialist Legal Advice on Commercial Leases 

Commercial property is an important tool for landlords and tenants: it provides the former with a predictable revenue source, while the latter gains a presence in the business sphere. The importance of working with an experienced legal advisor in negotiating terms of a commercial lease cannot be underestimated. Depending on the terms on which the bargain is struck, both landlord and tenant may find themselves being able to enjoy a mutually beneficial relationship. Landlords will seek reliable tenants that will observe their obligations, and tenants will look for strategically placed property that is owned by landlords that are understanding of their needs.

At NA Legal, we are regularly sought out by both landlords and tenants to assist with commercial lease work. Our expertise ranges from planning and negotiating contractual terms, through to advising on disputes where poor drafting has caused confusion on where responsibility lies. NA Legal take a commercial, pragmatic approach, working with clients to agree terms that are reflective of their needs for commercial property. If you would like to speak to a lawyer with expert drafting skills and a mind for negotiation, contact us at NA Legal today.