Why is it a good idea to take sound commercial property lease advice? Where a tenant or landlord is involved in negotiating a new lease for an office or other commercial property there will be certain issues which are likely to become apparent that are specific to that type of property, and certain issues that are more general. You will find the basics of commercial property leases explained below.
New Leases – Restrictions and Obligations
Commercial property lease advice is usually needed simply because leases contain a number of rules, regulations, obligations and restrictions dealing with many issues that will affect any specific type of commercial premises. But clients do not just want their prospective commercial property leases explained. The lawyer’s role is more proactive than that. All and any of these matters will have to be negotiated for the grant of any new lease, or negotiated for any variation in an existing lease. For example, a new lease of an office premises may incorporate restrictions on specific types of use, e.g. whether it be used as a bookmakers or a job centre. There may also be restrictions of any alterations or works that a tenant may wish to undertake. There may also be restrictions of the number of occupants working at a premises – these will generally also be covered by legislation.
Prohibitions on certain types of use
Use of Areas
These issues are not usually covered by legislation, except where health and safety is relevant. Generally there will be provisions in the lease which will expressly regulate types of use of different parts of the premises.
Use Classes for Offices
Offices are in the same use class as light industrial premises (B1). It may well be therefore that a straightforward office may be next to a manufacturer. Although these premises will be less noisy than a full-blown factory, this can result in increased traffic through communal areas, louder noise levels than a normal office, at least in the communal areas, increased use of outside parking areas, including by larger vehicles. Good commercial property lease advice will also include making enquiries as to the nature of the neighbouring tenants’ business if a prospective tenant. A landlord should also be aware of the potential affect on other tenants and ultimately property value before considering allowing light industrial usage.
Hours of use
This is a big topic for any office property in a block. This is primarily because the work life of employees has changed considerably in recent years. Where a company deals with other companies overseas, staff may need access overnight. An office block will often not allow access after 6 or 7 pm, or before 8 or 8.30 am. It is generally therefore advisable that arrangements for out of hours use are provided for in the lease. Landlords will often charge for this out of hours use, and this will become part of the subject matter of the negotiation of the lease. Increased costs that landlords are advised to consider include heating, lighting, air conditioning, and security.
Parking is also often a significant issue. An office will often need visitor parking, security for parking. There may be restrictions on the type of vehicles that can be parked, for example only light or small commercial vehicles. Some parking facilities are only accessible by lift where access is limited. Many of these factors increase the service charge significantly.
For an office property, a service charge for the common parts of the property may be written into the lease. This service charge generally covers upkeep and maintenance, reception areas, escape routes, parking etc.
Break provisions in the lease
These can be unilateral (break by one party) or mutual (both parties must consent). Notice to break can be required. Conditions can exist in the lease for handing premises back (also known as ‘yielding up’ covenants) in good condition. It is often advisable to get independent surveyors to monitor the state of the building and the bringing back of the property to good condition. If the property is not handed back in a way that conforms with the covenants in the lease, the tenant could risk being held liable for the rest of the lease. A state of good and substantial repair and condition and decorative order on the final day will usually be a precondition in the lease to a break clause being enforceable.
As can be seen above, the issues surrounding new leases can be relatively complicated. Most clients need commercial property leases explained properly, focusing on any areas that may affect their business. Good commercial property lease advice should of course always be tailored to the client’s requirements.