Commercial Property

Introduction

When a landlord grants a lease of commercial premises to a tenant, the initial rent is negotiated and agreed between the parties.  However, where the term of the lease is longer than just a few years, such initial rent may not represent the true value of the premises for the whole term.  Most commercial leases therefore contain a rent review clause allowing for the rent to change over time, to reflect the changing value of the premises and the lease. 

This checklist sets out the key issues that a landlord should be aware of if a tenant fails to pay the rent due under the terms of a lease of commercial premises.

This checklist sets out the exemptions from business rates for non-domestic properties.

Retail property 

• 100% relief for a continuous period of three months only.
• Changes of ownership during the three-month period do not trigger a fresh three-month exemption. The exemption applies to the property, not the person paying the rates.
• Short-term occupation of the property (of six weeks or less) by, for example, a tenant or licensee during the three-month period will be ignored. The three-month period and the business rates exemption will continue to run despite any short-term occupation. This rule prevents owners from gaining additional periods of rates exemptions by establishing a temporary letting.
• If the property is let or occupied for a period of more than six weeks, the rates exemption will end at the start of that period, but when the property becomes vacant again, a new exemption period can be claimed.

What are dilapidations?

Dilapidations are items of disrepair in the context of leasehold property, where a tenant is in breach of its obligations to the landlord.

Most of the relevant obligations will be contained in the lease – mainly the covenant to repair, but also other covenants including those concerning redecoration, complying with statue, reinstating alterations and yielding up at the end of the term.  Supplemental documents such as deeds of variation or licences for alterations may also contain relevant covenants which should not be overlooked.

Introduction to Competition Law

Competition law (or antitrust law, as it is more commonly known in the US) is designed to protect consumers from anti-competitive behaviour by businesses, by: 

• prohibiting agreements that restrict or distort free trade and competition
• prohibiting abusive behaviour (such as price fixing) by firms with a dominant market position, and
• supervising mergers and acquisitions of large corporations.

The UK law prohibiting anti-competitive agreements is contained in Chapter I of the Competition Act 1988 (“Chapter I”).  (Article 101 of the Treaty on the Functioning of the European Union also applies to agreements that have the potential to appreciably affect trade between EU member states although, in practice, this is less likely to apply to UK land agreements.)

Discrimination legislation imposes a duty on your businesses to make reasonable adjustments to premises or working practices where a disabled job applicant or employee is placed at a substantial disadvantage. Failing to comply with this duty is a form of disability discrimination. There is no limit to the amount of compensation that can be awarded for a successful disability discrimination claim.

What is a break clause?

• A break clause can be included in a fixed-term lease allowing either you or your landlord to terminate the lease early.
• Exercising a break clause brings the lease to an end. However, where the landlord breaks the lease, there is legislation in place that may allow your business to remain in the property after the lease has ended. 
• Depending on how your lease has been drafted, the right to break the lease may arise on one or more specified dates, or it may be exercisable at any time during the term of the lease on a rolling basis. 
• A break clause may only be exercised if any conditions attached to it have been satisfied (for example, providing vacant possession). A break clause will be strictly construed by the courts and any conditions must be strictly performed. 
• Depending on how your lease has been drafted, the right to break the lease may arise on one or more specified dates, or it may be exercisable at any time during the term of the lease on a rolling basis. 
• A break clause may only be exercised if any conditions attached to it have been satisfied (for example, providing vacant possession). A break clause will be strictly construed by the courts and any conditions must be strictly performed. 

1. SDLT avoidance schemes: a word of warning
2. Summary of the measure of damages under dilapidations claims
3. Alternative rent review mechanisms
4. New version of the Commercial Property Standard Enquiries

Introduction

Business leases enjoy the statutory right to a lease renewal at the end of their contractual term if it satisfies various criteria set out in the Landlord and Tenant Act 1954 (‘LTA 1954’). This right is also known as the right to ‘security of tenure’. Security of tenure means that a tenant will be entitled to a new lease at the end of the contractual term, the terms of which are to be agreed between the landlord and the tenant. If the terms of a renewal lease cannot be agreed, it will be for the court to determine the matter.

1. Authorised Guarantee Agreements: Case law update
2. Summary of the implications of the Equality Act 2010 for property owners and occupiers
3. Revised guidance on the CRC Energy Efficiency Scheme
4. Landlord’s additional security: what are the options?