SOLVING LEASE PROBLEMS
After nearly 20 years offering advice to office tenants, finding them new offices and negotiating their rent reviews I thought I would put pen to paper (so to speak) and share a list of all the things I have seen go wrong!
Here are the 20 that have caused the most pain….
The lease
There is no substitute for actually reading the lease you are taking and asking your solicitor to explain anything you do not understand. There is normally no comeback after exchange of contracts. We do NOT read the lease or draft lease and you will be relying on your solicitor to fulfil this role.
Telephone and data cables
Can BT or your provider get from the street all the way to the riser? An early BT survey before exchange is vital – new lines take months not weeks to install. Do you need a Wayleave to get your chosen supplier into the building? Wayleaves are slow and expensive.
Electrical survey
Is the electrical system substantial enough to take a modern loading? Does any cooling system use outdated coolants? Will the cooling work for different layouts?
Use
Is the use you propose permitted by the local authority and by the lease? If in doubt ask your solicitor.
Deposits
Landlords often expect rent deposits – the amount varies from 3 months’ rent to a year’s rent depending on the level of profits shown in your last 3 years audited accounts.
Landlord’s (or tenant’s) building works
They need to be accurately described in the contract documents – misunderstandings are the norm. Is the Landlord planning external or common parts works?
Sub-letting or assignment
Does the lease permit subletting at a rent less than you pay? Will a poor EPC affect your ability to sublet or assign as there are now Minimum Energy Efficiency Standards?
Sharing
Commercial leases usually prohibit sharing with other people or organisations unless they are part of your ‘Group’.
Survey, building works
The best advice is always have a survey. I do not do surveys but we know people who do. Can you get a Schedule of Condition limiting your obligations? Watch out for the laws on asbestos and watch out for who repairs the window frames.
Service charge cap
Service charges can go up often without limit unless you have a cap in place in the lease.
Kitchenettes
Is there a kitchen or kitchenette? Does it have/need an extract system? Are any capped off services actually connected? Does the kitchenette comply with the Fire Regulations?
Alterations
Permissions from landlords for example to alter, assign or sublet take ages to obtain and are expensive to document because tenants pay landlord’s costs for considering the proposals. Make sure you have consents in place BEFORE you exchange contracts including for any work outside the suite.
Partitioning
Can you partition without interfering with the air-conditioning and Fire Escape routes and can you partition on ‘notice only’ without getting formal consent each time you want to alter the layout? Will building regulations require you to provide a fresh-air system?
Health and Safety and asbestos
Have you taken advice on the implications of health and safety legislation and the Disability Discrimination Act and have you asked via your solicitors if there is an asbestos register? If there is asbestos present the tenant is often responsible for the cost of remedial work.
Fire Precautions
Are there sufficient fire precautions? Fire precautions works within the floor are usually the responsibility of the tenant and complying can be expensive.
Break options
These should be as free as possible of conditions other than notice – especially conditions requiring you to comply with general lease terms before you can break.
VAT
Rent and service charge are usually subject to VAT – Charities especially beware. Deposits are ALSO normally subject to VAT which cannot be reclaimed until expiry.
Floor areas and Business rates
Is the actual floor area as quoted? Are the business rates quoted by the letting agents correct, calculated on the right floor area and are they worth appealing? When will they go up?
Dilapidations
Do you understand the true meaning of ‘dilapidations’? Commercial property normally has to be returned at the end of the lease in good order throughout regardless of its condition at the start.
Keys and signage
Remember that few landlords give you more than one set of keys. Security keys are especially expensive. Get permission for your signs in writing before you exchange contracts.
Neville Forrest MRICS
Neville Forrest MRICS
Specialist in offices for charities, media and health companies
Important general proviso
Neither I or Ovington Property have Building Surveying, legal or IT skills. We are Agents. Any suggestions or comments made here or during the course of any instructions in relation to building works, fire regulations, health and safety, legal matters, IT or the condition of the premises and services are made in good faith but strictly without liability on the part of Neville Forrest, Ovington Property, its staff or consultants.