Solicitor Ed Williams, in our Commercial Property & Planning team, explains what a Side Letter is in the context of Commercial Property Leases.
Side letters are commonly used in lease transactions to record temporary concessions or waivers to the terms of a lease. A side letter may be agreed during the contract stage or during the course of the lease.
When is a Side Letter appropriate?
A side letter is appropriate for minor or short-term waivers or concessions. The contents of a side letter are typically intended to be personal to the tenant, ensuring they do not bind successors or future assignees. Where a permanent variation to the lease is required, a Deed of Variation is likely to be more appropriate. The appropriateness of each option should always be reviewed before deciding which document to use.
What to use a Side Letter for?
Common situations where Side Letters are used include:
- Temporary rent concessions, such as a short rent reduction or a rent-free period. Either may come up for several reasons such as where the landlord’s works disrupt the tenant or where the tenant requests short term help with cashflow.
- Allowing the tenant to pay the rent monthly rather than quarterly, which can be dealt with this way rather than in the lease to ensure that if the lease is assigned, the new tenant will pay quarterly as per the lease.
- A temporary relaxation of a use covenant, such as permitting an otherwise prohibited activity or allowing extended access hours for a limited period.
Conclusion
A well-prepared side letter provides clarity for both the landlord and tenant by accurately recording terms agreed between the parties where it is not desirable for those terms to be included in the lease itself. It is important, however, that the document is drafted correctly so that it is enforceable and that it reflects what the parties intend. Given the complexity involved, we recommend seeking expert legal advice before entering into a Side Letter.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
