Signing your first commercial lease can be an exciting time for a business owner.
However, it can be all too easy to become overwhelmed by the complexity of the process and thereby miss important considerations, which could lead to a dispute later on.
One such area is regarding the extent of the property comprised within the Lease.
Tom Gibbons, commercial solicitor at Tallents, discusses some of the potential issues that may arise.
Why you need to know the extent of the property comprised within a lease
“Aside from the simple issue of whether the lease includes a sufficient area for the tenant’s proposed use, knowing the extent of the property comprised within a Lease has important consequences in two main areas,” says Tom:
- Repairing Obligations. A tenant is usually obliged to repair ‘the property’ comprised within a Lease. Therefore, in order to understand what it is that the tenant must repair, it is crucial to understand what extent of property is (and is not) comprised within the Lease. This will be relatively straightforward where a lease includes the whole of a building.
However, where the Lease is of part of a building, or of one Unit within a wider estate, the lease itself will need to make provision for how certain items (structural walls, internal partition walls, roof, shared parts etc.) are to be dealt with.
The Lease must clearly state who is to be responsible for repairing a particular item.
- Whether rights are needed in relation to other property not comprised within the Lease. Again, on a Lease of the whole of a building, this is less likely to be an issue than in relation to a Lease of part of a larger building/estate.
The most obvious issues that might arise are: rights of access and rights to supply of services.
From the tenant’s perspective, if the property comprised within the Lease is dependent on access and/or supply of services over other adjoining property belonging to the landlord (for instance, shared hallways within buildings or access yards and driveways around buildings), then it is crucial that the scope of the tenant’s rights to use those areas should be clearly set out in the Lease.
Another, perhaps less obvious, point would be to consider whether rights may be needed to go onto neighbouring land in order to keep the property in good repair. A lack of appropriate rights could lead to a dispute with the landlord and/or other neighbouring tenants and may well lead to difficulties if the tenant looked to assign the Lease on to someone else, for instance as part of a business sale.
Likewise, for landlords, it is important to ensure that the Lease reserves any necessary rights over the property comprised within the Lease. This might include: rights of access, rights to supply of services to the rest of a building through wires, pipes etc. located within the leased property and rights to redevelop neighbouring land without further reference to the tenant. Again, inadequate provisions in this respect might lead to disputes and could complicate a sale of the landlord’s interest in the property.
Avoid potential disputes by confirming extent of property comprised in a lease at the outset
Landlords and tenants should ensure they are protected in relation to these matters, by giving proper thought to the precise extent of the property to be comprised within a Lease, and by discussing any issues with their advisers as soon as possible.
“Getting this right at the outset of the is preferable to storing up the risk of a dispute, which can be costly and may impact on future transactions.”
Tallents’ commercial property department has experience in advising sellers, buyers, landlords and tenants regarding all aspects of buying and selling or leasing commercial property. In the event of a dispute then their specialist litigation solicitors can help guide clients through the process.
For more information please contact Tom Gibbons on 01636 671881 or at firstname.lastname@example.org