Commercial Property Tenants and Occupiers

Landlord's Consent

Often, a landlord cannot unreasonably withhold consent but what is meant by acting unreasonably?

With current commercial uncertainties, flexibility is critical. The ability to assign or sublet or even make alterations or a change of use can be critical for business strategy. Both commercial property Leases and statutory rights often prevent landlords from withholding consent unreasonably.

We often advise concerning whether or not consent is required and what timescales might apply. We act to assist by procuring consents without delay or working with surveyors and valuers to establish market rent levels or to satisfy other preconditions. In the event that consent can be withheld, we often advise regarding commercial alternatives or strategy for negotiation. We recognise that dealing with assets can be timecritical, such as finding subtenants and delay caused by a landlord could prove fatal. Regarding conditions, what conditions can a landlord impose reasonably?

Repairs and Dilapidations

A well-advised tenant will monitor repairs and reinstatement to avoid Lease termination liability.

We understand that a tenant’s business comes first, but planning regarding repairs and reinstatement obligations is critical. Generally, a tenant has an opportunity to carry out repairs and reinstatement during the Lease term, but not afterwards. In the absence of carrying out repairs, landlords may seek the costs of carrying out repairs and reinstatement in default, together with other heads of claim such as professional fees.

We assist in connection with preventative strategies and also terminal dilapidations (Schedules of Disrepair served after the Lease has come to an end). We work with surveyors to provide advice and, if necessary, deal with any litigation/disputes arising.

Service Charges

Commercial buildings with multiple tenants usually provide for service charges. Common areas of dispute involve matters such as the level of information a tenant is entitled to and whether landlords can recover items of expenditure that go beyond repair or are carried out towards or at the end of the Lease term.

Lease Exit

Certainty regarding Lease exit can be essential for business planning.

Coordinating a move to new premises, rights to renew a tenancy and agreeing (or serving notice) to determine the final date for vacation are both important and problematic.

Early dialogue with the landlord and considering matters such as dilapidations, serving notices and statutory renewal rights can be critical so as to avoid delay and risk and to ensure an effective coordination of dates and logistics.

Lease Renewal

Many Leases are ‘inside’ the Landlord and Tenant Act 1954, meaning that the tenant has a statutory right to renew its Lease. However, the process is complicated and can become expensive and cause delays.

Early advice is critical so as to develop a strategy and ensure that notices are not missed, including an Application to the Court. In a market with fast-changing circumstances, tenants need advice regarding the likely terms a Court will order for a new Lease so as to carry out effective and commercial negotiations with a landlord.

We have experience in negotiating the Lease renewal process, including dealing with Applications to the Court and Court processes.

Surrender, Assignment and Subletting

The tenant’s right to assign or sublet are an important factor to mitigate losses and increase flexibility. Taking advice regarding tenants’ rights and the process of dealing with assignment or subletting can be useful, especially if taken early on.

In some cases, negotiations can take place for a surrender and terms agreed.

Break Notices

Break notices have developed into a notorious area of property law. Often, break notices require strict compliance, meaning that even if a notice is served by a tenant, there remains a strong possibility that the notice might be ineffective, in which case the tenancy will continue. This is a substantial and severe risk for a tenant. Often, break notices are provided for on a once-and-for-all basis. If the opportunity to break is lost, a tenancy may continue for a further three, five or ten years.

We assist in advising regarding break notice strategy, including break notices and other dealings to comply with break notices or assisting with drafting the break notice terms in the first instance.

Rent Review

Market circumstances impact on rent review. In a falling market, it is important that the openmarket rent to be negotiated by a tenant fairly represents prevailing market rates. However, the rent review process can be difficult and protracted.

Drafting trigger notices and advice, if necessary, concerning expert determination or arbitration and making offers so as to maximise the chances of success to have in place a rent that effects market normals is most important to commercial tenants, particularly now.

We assist by understanding and explaining the process and working closely with rent review surveyors and in terms of disputes or problems with the rent review machinery or independent determination process.

Alterations

Whether or not the tenant has a right to carry out alterations can be confusing, depending on the nature of the alterations, the location of the alterations and timing. It is usual that commercial Lease provide the tenant with at least some right to carry out works but often with the consent of the landlord not to be unreasonably withheld.

Even if the landlord does not need to give consent, we may assist with negotiations. The documentation of any consent or Licence for Alterations is important, dealing with such matters as costs and reinstatement.

The reinstatement of alterations can become an expensive and important factor upon Lease termination.

Interference with Business

With many changes concerning the use of commercial properties, it is important that a tenant’s business is not interrupted by other uses or factors such as development works nearby. Most Leases have some provisions regarding the tenant’s ability to operate from its commercial premises and we advise in circumstances where the tenant’s ability to trade has been unreasonably interfered with.