Getting the most out of your commercial lease – Part II

So you’ve decided to lease commercial premises rather than buy. In Part I we talked about setting the rent on your commercial lease, reviewing the rent and the term of the lease. Read the blog here if you missed it. In part II, we’ll look at security of tenure, your obligations regarding upkeep and repairs and restrictions to the use of the building.

It’s worth pointing that the lease is a legal contract. Both tenant and landlord should be rigorous about making sure they understand the terms of the lease and their potential ramifications.

Security of Tenure

Under the Landlord and Tenant Acts 1980 and 1994, tenants of business property are afforded security of tenure. Security of Tenure is the right of a tenant to occupy the premises after the lease expires. It basically protects the tenant against eviction. Be aware that Security of Tenure may not be built into short-term leases.

While Security of Tenure is there to protect the tenant, landlords may legitimately oppose a tenant’s application for a new lease if the tenant has consistently flouted the terms of the lease or if plans for development of the premises are at an advanced stage.

Repairing and upkeep obligations

Pay particular attention to the clauses relating to redecoration and repairs. Tenants tend to be responsible for the interior but can also be responsible for external repair and general upkeep especially where the term is longer.

An obligation to keep a property in good repair requires the tenant to put it in repair. So be aware if you are leasing a property that is older or in a poor state that you will be responsible for bringing it up to standard. This is where a survey by a chartered surveyor is invaluable. You need to know exactly what you are letting yourself in for. Should there be major structural problems, the surveyor will be in a position to negotiate that the landlord takes on some or all of the responsibility for the works.

Pay attention to the dilapidations clause. Dilapidations are repairs a tenant is required to carry out at the end of a lease to repair damage to the property or return it to its original state. For the landlord, this ensures the property will be returned to him or her in at least the state it was let. The tenant should allow a budget to take care of dilapidations when the lease comes to an end. As these are often the source of conflict, having your chartered surveyor prepare a schedule of condition when you take the lease will give the tenant (or the landlord) some comeback.

Restrictions to use of the building

A landlord may restrict the uses the building may be put to. Planning permission, building regulations and fire certificates also restrict the possible uses of the building so if you are the prospective tenant, make sure the business activity you had in mind is permitted before signing.

Extra costs

Make sure everybody is clear who is liable for the costs associated with property such as rates, insurance and service charges. We covered those in a previous blog. Check it out here.

Whether you are a landlord or a tenant, entering into a lease is a serious business. The lease terms should be carefully considered. While it is impossible to see into the future, both parties should be as satisfied as possible that the terms will be acceptable for the full term of the lease, taking into account plans for the business/the property.

O’Neill & Co is at your disposal for the full range of landlord and tenant issues, including advice on leases, landlord and tenant law, specialist rent review advice and negotiation of rent at review, by agreement or arbitration. We specialise in offering strategic advice on the implementation of rent reviews in multi-tenanted buildings and shopping centres.

Don’t hesitate to call us with your question on 045 856604, whether you are a tenant or landlord.