What is a lease?

If you asked a lawyer you would get a response along the lines of “an agreement in which an estate in land or property is created but only for a finite term.”

The dictionary would tell you that it is “a contract granting use or occupation of property during a specified period in exchange for a specified rent or other form of payment.”

Or you might get told by the letting agent or your landlord “it’s nothing to worry about because everybody signs them.”

In reality, modern leases tend to be very long, convoluted, complex documents drafted by the landlord’s solicitor to cover every possible eventuality and occasionally some that seem impossible.  But once you sign up you are obliged to comply with ALL the terms and conditions, even those you didn’t quite understand or get to read hidden somewhere in the middle of page 27 because “it looked alright”. You may want to consult a solicitor to iron out your obligations and negotiate parts of the contract that could become problematic in the future.

How long does it take when terms have been agreed?

This is really very difficult to estimate with any degree of accuracy.  If I ask you “how long is a piece of string?” you hopefully get the idea.

How extensive will negotiations be?  Whether you are the landlord or the tenant you might have agreed something that could be problematic and needs to be renegotiated. Nobody should ever feel “bullied” into any transaction. But as a tenant you can’t start trading until you are in.  And as a landlord you want a tenant and not an empty building.

Here at Levins Solicitors, we would always endeavour to provide you with a speedy, efficient, professional service, although you will probably appreciate transactions tend to go at the speed of the slowest.  We will not be the cause of any unnecessary delay in our handling of your business affairs.  We remain proactive, chasing where necessary and will advise you of progress each step of the way.

What is a Lease Assignment?

This is the process by which the current tenant assigns his interest in his Lease to a new tenant.

A lease is the agreement between the landlord and tenant. If you are a tenant and want to sell up and sail off into the sunset because you have a willing replacement you are going to need permission from your Landlord to assign your interest and obligations contained in the Lease.

As a tenant you should check your lease before you signed just to make sure this process of assignment is possible.  If your lease says something along the lines of: “…not to assign transfer charge sublet dispose or share or part with possession of all or any part of the demised premises…” As a tenant you will most likely not be able to assign the lease over.

Of course, as a prudent client you will have received advice before committing yourself so you will remember what you were told at the relevant time.  The landlord wants to know who is in occupation of the property and in particular the person or company who now wants to take up occupation has sufficient financial clout so that the rents required by the lease will be paid.

Here at Levins Solicitors we can help guide you through this process whether you are the Landlord or the Tenant.  You would expect the lease to stipulate that the Tenant must be responsible for the fees of the Landlord’s Solicitor.  Whether you are the Landlord or the Tenant your interests are indeed served by ascertaining the financial strength of the incoming tenant.

What is an AGA?

An AGA is an authorised guarantee agreement.  The historical background is very interesting but there again we are lawyers.  All you probably want to know is that if you are a tenant and subject to an AGA (and almost inevitably you will be) then as an outgoing tenant you act as guarantor for your incoming tenant for as long as the incoming tenant holds the lease.

This is why as a tenant you want to know the financial strength of the incoming tenant.  If the person or company defaults the Landlord is more than entitled to look to you for financial resolution.  It is worth having a chat with us here at Levins Solicitors were we can guide you through any obligations you have.

What is a Rent Deposit?

The tenant must deposit a sum of money in an account which the landlord can use if the tenant defaults.

If this is being requested professional advice is almost essential.  When can the landlord withdraw from the account?  How much can be withdrawn?  What will happen if the landlord becomes insolvent?  Who owns the money?  Is it going to be returned to the tenant?  Is it going to be kept for the whole term or a shorter period? Advice and negotiation will be required as the area is complex.  As a tenant you might be asked to pay 12 months’ rent up front as a rent deposit.  If you can’t get that back you might have saved on professional fees but you’ve lost considerably more.

Can you tell me a little about rent reviews?

A landlord who owns a property and rents it out to a business is an investor and wants maximum return on that investment.  If the rent is fixed for the duration of the lease in times of inflation his investment isn’t growing and unless the lease is for a few years, the landlord will want to ensure the rent is increased periodically.  So, there is a rent review clause contained within the Lease.

There are different ways of reviewing rent and could include a turnover rent.  Big turnover surely means big rent but unfortunately doesn’t mean massive big profit!  If instead of turnover rent was based on profit that would seem OK if you are the tenant but if you were the landlord you probably wouldn’t want to see rental levels fluctuating as profits rise or fall subject to the skill and efficiency primarily of your tenant, a matter over which as landlord you have no control.

A traditional upward only review benefits the landlord.  If the review would allow for the downwards movement in rent this would be good for the tenant.  But a big institutional investor will not be happy with this.

A fixed increase is feasible but trying to predict realistic increases means this type of review is pretty rare.

Revaluation to open market rent therefore tends to be the most common type of review.

You would expect to read something in the draft along the lines of: rent at which the premises might reasonably be expected to be let in the open market on the review date by a willing landlord to a willing tenant.  There will be “assumptions” and “disregards” and one of the assumptions may well be the premises are fully fitted out.  But if you as a tenant have fitted out at your expense what happens then? 

The answer is here at Levins Solicitors.

Do I need a Solicitor?

Obviously, it’s going to be a whole load quicker and easier if you don’t bother.  You may save money because you won’t have to pay fees.  But you are then stuck with the terms and conditions contained in the Lease which down the line might cost you a considerable amount of money.

Almost inevitably no one lease is ever exactly the same as another and in reality, the document called lease that you are asked to sign is a document that to the unwary or ill-informed is full of pitfalls and problems. Each lease is unique so it should be very closely scrutinised and when necessary amended so that it fits your requirements which is where Levins Solicitors come in.

Entering into a lease agreement with clarity and the benefit of expertise is highly advantageous, if you would like to speak to our Commercial Team here at Levins Solicitors before signing please contact our office via telephone or email, details of which can be found on the ‘contact us’ tab of our website. 

If appropriate we are more than happy to provide a fixed fee service but there are circumstances when this won’t be possible but at least we will give you a cost estimate so you have a good idea what the total cost is going to be.

I am being asked to stand as guarantor.  What does this mean?

Another word for guarantor is surety. The landlord wants a third party to guarantee the tenant will perform all its obligations contained in the lease.  And if it doesn’t the landlord will look to the guarantor or surety to step in.  So, if you are a director of your own limited company the landlord might insist you and even a second director both give a personal guarantee so you will become personally liable in the event of default.

If this is your position you need to carefully consider whether you genuinely want to take the risk, as if such a scenario was to occur all your personal assets would be up for grabs.

Here at Levins Solicitors we can give you the appropriate advice.

I didn’t ask for a Break Clause?  Should I have done?

This would enable either the landlord or tenant to bring the lease to an end earlier than the otherwise agreed length of the lease. From the landlord’s point of view, it would be convenient if it intended for example to redevelop the site as rent could be collected up until the redevelopment could actually start.

From a tenant’s point of view, it might be useful to avoid excessive hikes in rent and to free a tenant in the event of the premises being perhaps too costly, for instance if the business isn’t booming in accordance with the business plan despite best endeavours.  Effectively it is a get out clause for a tenant and should be seen as reflecting prudence rather than cowardice or lack of confidence in your business.

But a correctly drafted Break Clause is going to be essential for it to be effective and a landlord would not necessarily need to be cooperative.  Here at Levins Solicitors we can advise you on the intricacies of this very important clause as part of an overall package contained within the Lease.

If you are a tenant thinking of exercising your rights under the Break Clause please get in touch with us here at Levins Solicitors because time limits are absolutely critical and strictly enforced by the Courts.

Could I have got a rent-free period?

If the landlord is struggling getting a business tenant, a rent-free period is definitely a nice sweetener to tempt a tenant.

Almost inevitably the premises are going to need some form of fitting out before you move in and can start earning money so by negotiation some period rent free should be negotiated with the landlord.  Certainly, you won’t get what you don’t ask for.

But if you are the landlord and provide this concession you need to be very careful at rent review as to how the rent-free period you gave at the beginning is to be treated now upon rent review.  This is because of the interrelationship between one clause and another.  If you are a tenant you could benefit from a modest windfall if the landlord doesn’t do it correctly. Only with careful drafting, which we at Levins Solicitors can advise upon, will your position be protected, which is why it is always worth giving us a call to discuss your requirements.

What can you tell me about security of tenure?

It is pretty boring quoting law and you probably didn’t want to know the Landlord and Tenant Act 1954 covers the statutory renewal of business leases but it does in fact provide security of tenure for a whole host of commercial lettings.  When the lease otherwise would end the effect of the Act is to extend the lease.  And the tenant can apply to the court for a statutory renewal of the tenancy.

You might as a landlord think a good way to avoid the effects of this statute is to call the occupancy a licence but that probably is doomed to fail.  Whatever you call it a court might determine the occupancy is that of the Lease and therefore automatically does get caught by statute.  In this scenario you may have saved in legal fees at the beginning but you are now costing yourself considerably more.  Here at Levins Solicitors we can actually help you by assisting in the negotiations and agreeing with a prospective tenant to exclude the tenancy from security of tenure.  This is pretty technical and also includes serving a health warning on the tenant and unless you are very experienced it might be sensible to speak with us here at Levins Solicitors.

What is this section 25 notice?

You are a tenant and you’ve got protection under the Landlord and Tenant Act 1954 but you’ve received a notice and your landlord is claiming possession of the premises. You’ve received a hostile notice.

But if you look closer it might be a non-hostile notice because a section 25 notice still has to be served even when the landlord is happy for you to remain in possession under a negotiated new lease.

This procedure can be pretty confusing and complex and if you’re running a business you haven’t got time to be dealing with this matter personally as you continue to pour all your energies into turning a profit.

If the tenant had served a section 26 notice the landlord can’t serve a section 25 notice.  And as a landlord it has to be a prescribed form.  And there are very strict time limits which if you slip up doing it yourself renders the whole process invalid.  And you might have to pay compensation at the end of the process depending on what the lease says.

If you are a tenant and receive a section 25 notice we at Levins Solicitors can help you whether the landlord is hostile or not.  And if you are a landlord hostile or not again we can assist you to get it right first time.