These lease provisions are called ‘rent review’ provisions. Leases over five years normally include provisions to review (change) the rent at specified intervals during the term. Can a commercial lease include provisions to change the rent payable? The right to renew a business lease is a valuable tenant right and you should think carefully before agreeing to the lease being excluded from the 1954 Act. A specified procedure involving the service of statutory notices and the swearing of a declaration needs to be followed to ‘exclude’ the lease from the 1954 Act. However, it is possible for the parties to agree (prior to the grant of the lease) that the tenant will not have these renewal rights. Even then compensation may be payable to the tenant. The landlord has some limited grounds to resist the tenant’s request (the most common being that the landlord needs the property for its own occupation or wants to redevelop it). At the end of the lease, the tenant can ask the landlord for a new lease. Subject to satisfying certain criteria, business tenants have a statutory right under the Landlord and Tenant Act 1954 to extend the contractual term of their lease. Can the contractual term of a commercial lease be extended? As a result, tenants often need to pay a higher rent for the flexibility of a break clause. For this reason, when valuing property, it is normal to assume that a tenant’s break will be exercised. If exercised, the income from the property will stop until the property is re-let. Break clauses are frequently included in commercial/business leases.Ī break clause can significantly affect the investment value of a property. What is a break clause?Ī break clause is an option for either the landlord or the tenant (or both) to end the lease before the end of the term, usually on a specified date by giving notice. In recent years, the trend has been for considerably shorter leases and the average length is now around eight years. They are rarely granted for more than 25 years. The period of time for which a commercial lease is granted (called the “term”) will vary depending upon the nature of the letting and the requirements of the landlord and the tenant. Is there a typical lease length for commercial leases? There is a code of practice, the Code for Leasing Business Premises (see here) but, as it is a voluntary code, leases are often not ‘Code compliant’. No, lease provisions are not heavily regulated in England and Wales. Are lease provisions regulated or standardised in England and Wales? Upon receipt of the draft lease from the landlord’s solicitors, as your legal advisors we will review its provisions, discuss them with you and put forward amendments for discussion/negotiation. Where a new lease is being granted, the contractual terms can usually be negotiated (even if the landlord states otherwise). However, we would advise that the lease terms are reviewed carefully as the value of a property can be adversely affected by unusual or restrictive terms. If you are acquiring an existing lease, its terms are not normally open to negotiation. Can you negotiate on the terms of an existing lease? The key areas are the length of the lease, rent and other payments to be made by the tenant, service charge, repairs and decoration, alterations, use and dealing with the tenant’s interest in the lease. What are the key areas covered in a lease? The content of the lease will vary depending on the property type, its physical condition, the relationship between the landlord and the tenant (their relative bargaining powers) and the state of the property market.īelow are some frequently asked questions concerning commercial lease provisions. The lease is the principal document setting out the contractual relationship between the owner of a property (the landlord) and the occupier (the tenant).
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