Legal Arrangements for Commercial Property
Background simple knowledge of the terms used in this sector.
a) Full Landlord & Tenant Act 1954 Leases
- 2 to 6-month turnaround
- Rentals over £12,000 pax
Main stream at the higher end of commercial space when Let, is normally covered by Long Landlord & Tenant Leases (often 50 to 65 pages). Traditional long leases over five years, with the security of the Landlord & Tenant are dealt with by solicitors. The Leases are registered with the Land Registry and stamp duty is paid upon them based upon the term. This type of lease covers a whole range of detail and when two solicitors represent both sides it takes around two to three months to finalise. The costs typically tend to be, for each side around £800 to £2,000.
b) Law Society Leases
- 5 to 10-day turnaround
- Small Scale Buildings on shorter terms (1-6 years)
- Rentals below £12,000 pa
Law Society Leases for lettings under £12,000 per annum are often dealt with by licenced outlets. These pre-printed documents are adapted for the property and are written in plain English in a manner to be understandable, showings each sides responsibilities.
Following due diligence on financial viability and money laundering requirements these leases can be issued and signed normally within a working week. The ingoing tenant typically pays the Lease costs of £350 + VAT, this covers a document which excludes the Security of Tenure provisions of the Landlord & Tenant Act and a deposit deed.
c) Older Buildings will also normally have a Schedule of Photographic Condition, which bench marks the state of the building, when the lease is conditional to keep the building in no worse condition than evidenced in the schedule.
d) Rental Bonds
Landlords will often require a rental bond or deposit to protect outstanding rent or dilapidations. This can be evidenced by a Rent Deposit Deed for tenants. The appointed stake holder holds the deposit and keeps the money in a bonded clients account, which in the case of East Commercial is highly regulated by the Royal Institution of Chartered Surveyors. This is a recognised and accepted alternative to the Government's own rental deposit scheme.
East Commercial – Experienced & Official Suppliers of:
- Law Society Leases / Security of Tenant / Extension
- Photographic Schedule of Condition
- Rental Bonds Deeds
- End of Term Dilapidations for either Landlords or Tenants
Simple Lease Terminology
To assist new businesses or a starter entrepreneur
Demise
The Extent of the Building or Land being leased, illustrated by text and a plan. |
Money Laundering
We are now required by Law to checkout large cash payments, individuals and company issues, which may be connected to illegal activity or terrorist related potential events. Simple checks on passports / driving license / living accommodation / utility payments are required to service this Government Requirement. |
Rental
Agreed payment for the building on an annual basis. Historically paid quarterly in advance on the quarter days (28th December, 31st March, 30th June & 11th September). Law Society Leases offer monthly payments to assist tenants cash flow. |
Quiet Enjoyment
The Tenant is left alone to occupy the part or whole of the property without undue interference. The Landlord has the right to inspect on notice or when there is a problem. |
Security of Tenure
This is the right to inhabit the property. If the Lease is within the security provisions of the Landlord & Tenant Act 1954 this is often the case on Long Leases. Short Leases are often excluded or outside the security provisions. Essentially Tenants under this exclusion simple must agree to extend the term at a rent otherwise tenants have to vacate by the Lease end. |
Full Repairing or Internal Repairing Clauses
In Commercial property the tenant takes either full or internal repairing responsibility for the building. In large buildings where a tenant has only use of a part of that building the Landlord will look after the “structure” and charge the tenant a service charge based on the proportion the tenant occupies of the whole. In older buildings, the full repairing liability maybe restricted by reference to a condition report, which will enable the tenant to keep the building in no worse state than represented in the agreed schedule of condition. |
Heads of Terms
The simple notice of agreement of the core issues and agreements, between the parties. The “heads” are issued to the solicitor or used as a base for a Law Society Lease. |
Internal Repairing Liability
Is decorative only, although the tenant may have to look after the heating, electrics and in retail premises the display windows as well. |
Due diligence
Carried out before the agreed terms are issued. Landlords expect an individual or partner in a business, to be checked out for both the ability to pay the rents and other outgoings and CJJ history. Established trading companies have their track record check, based on the HMRC submission accounts. |
Dilapidations
Is the term applied to issues of disrepair, reinstatement, decoration at the end of any lease term, however it occurs. Essentially the Landlord enforces the right to have the property returned in a good state of condition after the tenants use over the period occupied. Essentially on Long leases there are likely to be more issued as the elements have more deterioration. |
Insurance Rent
Under the Landlord & Tenant Act, the Landlord is responsible for providing Reinstatement Insurance to rebuild the property if it is damage by for instance fire. The Landlord charges the Tenant the annual insurance premium plus the TAX either in full or tranches. Being insurance rent, it is the strongest method of recovering any outstanding money. |
5 Year Electrical Safety Test
The biggest source of fires is caused by electrical problems and the Tenant or Landlord has to prove to insurance companies these tests |