Solicitor Ed Williams, in our Commercial Property team, explains.
A lease is a contract entered into by a landlord and a tenant which sets out the terms on which the landlord grants, and the tenant accepts, a lease of a premises. A commercial lease generally refers to a written agreement that not only creates a tenancy of business premises, but also sets out the often detailed provisions governing the relationship between the landlord and the tenant.
When are Leases used?
Leases grant exclusive possession of land or property for a fixed period to a tenant. They are therefore most appropriate where a tenant wishes to secure premises from which to operate their business with certainty. When considering whether to take a lease, it is important to assess whether a lease is appropriate, or whether a licence would be more suitable for the intended use.
Key terms in a lease
The type of lease will differ depending on the type of property, the tenant’s use, and the terms agreed between the parties. That said, when negotiating a Lease, the following issues are particularly important to consider:
- Property details: the extent of the premises being let.
- Rights required: identifying any rights granted or reserved, such as rights of access, parking, or services needed for the proper use of the premises.
- Contractual Term: the length of the lease, including when it begins and ends.
- Break clause: whether there is a landlord, tenant or mutual break, and the conditions and timing for exercising it.
- Security of tenure: establishing whether the lease is inside or outside the Landlord and Tenant Act 1954.
- Rent and permitted use: determining the rent payable, any rent-free periods, and the permitted use of the premises.
- Service charge: whether a service charge is payable and, if so, the scope and basis of calculation.
- Insurance: setting out who insures the property, who arranges cover, and how the cost is recovered.
- Repairing obligations: defining the extent of each party’s repairing and maintenance responsibilities in relation to the premises.
How does the transaction work?
Once the landlord has agreed heads of terms in principle, setting out the key commercial points, the landlord’s solicitor will prepare the draft lease. That draft is then negotiated between the landlord and the tenant. In parallel with the lease, the landlord’s solicitor may also prepare ancillary documents, such as a rent deposit deed or a licence for alterations. The documents required will depend on the terms agreed between the parties. Once all documentation has been agreed, the parties will then proceed with completion.
Conclusion
A well‑drafted lease provides commercial certainty, clearly allocates responsibility, and reduces the likelihood of disputes between the parties. Given the complexity of these transactions, we recommend seeking expert legal advice before entering into a lease.
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.
