When occupying a commercial property, whether as a landlord or tenant, several legal considerations must be made. In this article, the commercial property solicitors at Beverley Morris & Co. answer some frequently asked questions on this topic.

Does a commercial lease need to be registered?

All new leases granted on or after 13th October 2003 for a term of more than seven years are compulsorily registrable at HM Land Registry. However, some leases cannot be registered, for example, new leases for a term of three years or less (and which are not otherwise required to be registered). Read the government’s guide on when to register leases here.

Is it possible to get out of a lease?

A lease may be terminated for a number of reasons. These might include:-

• By agreement of the involved parties.
• By effluxion of time.
• By the valid exercise of a break clause in the lease.
• By forfeiture.
• By order of the Court.

As an alternative, a tenant might consider trying to assign the lease to someone else or sub-letting the premises with the permission of the landlord. It is essential to seek the appropriate advice when seeking to do so to ensure that you are aware of any potential pitfalls or obligations.

Can you change the use of a commercial property?

Usually, the permitted use of a commercial property is set out in the lease, and the landlord’s permission will be required to change it, which may or may not be granted, or it may be granted subject to the payment of a premium. A further consideration is that planning permission may be required to change the use of a commercial property. Uses are separated into ‘Use Classes’, and Local Authority permission is required when changing from one Use Class to another. Find out when permission is needed here.

What terms are important to consider in a lease agreement?

Key terms in a lease include the term (i.e. the duration of the lease), whether there is any security of tenure (i.e. whether you will be allowed to renew the lease at the end of the term), what flexibility there may be to vacate the premises before the lease comes to an end, the expenditure involved, such as the rent, business rates and any service charge, who bears responsibility for repairs and maintenance, what restrictions there are on making alterations to the premises and what type of business the premises may be used for.

Do I have to pay Stamp Duty on a commercial lease?

Depending on the level of rent and lease length, you will likely be liable to pay Stamp Duty on your commercial property.

Find out exactly how much you are liable to pay here.

Commercial Property Solicitors Blackheath

A commercial property may be required for various purposes, whether as somewhere from which to run your business, as an investment to let to an occupying business, or as residential property from which you will receive a rental income.

Our commercial property solicitors at Beverley Morris & Co. can assist you whether you are a buyer, seller, landlord or tenant.

We understand that your commercial property is typically the most valuable asset on your balance sheet. Our solicitors will offer their wealth of experience, industry knowledge and specialist advice to ensure that you fully understand your obligations and can fulfil them to the best of your ability, leading to an efficient and seamless transaction.

To speak to us today, please call 020 8852 4433 or email enquiries@beverleymorris.co.uk.

In a typical commercial transaction, the seller’s solicitors will draw upon a contract for the sale of a commercial property, whether it is for the sale of their freehold interest or the grant of a new lease.

If you are a prospective business tenant or buyer, it is always recommended that you instruct a trustworthy and reliable commercial property solicitor to advise you on the terms being proposed and to ensure that the contract or lease does not contain any onerous terms, as well as to assist you with post-completion formalities at the HM Land Registry and Inland Revenue. More importantly, the due diligence process is an integral part of your commercial transaction for reasons as explained in this article.

Buying a Commercial Lease

Modern leases are typically drawn up on a full repairing and insuring basis. This means that the obligation to repair and maintain the part of the building being leased to you falls upon your shoulder. Depending on the specific definitions in a lease, this responsibility may extend to parts of the building, including the structure and roof where you are liable for repairs and contributions and which is beyond the property demise. The consequence of such provisions could be impactful. In that regard, you should assess the annual rent which should reflect the state of repair of the building.

If you are a small start-up and proposing to take a short-term lease of five to seven years with or without an option to ‘break’ the lease, we would emphasise the importance of ensuring that you are satisfied as to the state of repair of the building. Even though the lease will be short-term, it will incorporate provisions concerning maintenance and repairs for which you will be liable as above, and depending on the age of the building, it could be expensive. In that regard, we would recommend conducting a commercial survey beforehand.

However, as well as the proposed terms of the lease, there are pertinent questions that may arise during a commercial transaction, such as results revealed from commercial property searches that may be alarming to your proposed use both from a practical and planning point of view.  You should also consider the identity of the landlord or the person you are liaising with. Do they have legal standing in the property? Are they an offshore company? Should the sale be classified as a transfer of a business as a going concern (TOGC)?

At Beverley Morris & Co., we raise appropriate due diligence enquiries to ensure you do not find yourself in a muddle down the road and that your business venture is not adversely affected in the years to come.

If you are buying the freehold interest or a long leasehold interest in a new-build property, we will advise you accordingly to ensure that there are no conditions that would detract a buyer should you, one day, come to sell the property at a future date.

Get in touch today on 020 8852 4433 or email enquiries@beverleymorris.co.uk to find out more.

Granting a Lease or Selling Your Commercial Property

Whether you are the freehold owner or the owner of an existing lease, instructing a commercial property solicitor is vital so that your solicitor can work out exactly what is involved from a legal point of view. This is particularly so since you will have the duty to provide an adequate contract/lease that correctly reflects the building as a whole.

You may be granting a lease of a part of the building or the ground floor shop premises, or you may be selling your existing Lease, or your freehold interest. Whatever it is, we will make your sale process seamless and accurate, and, more importantly, stress-free.

Parallel to a commercial purchase, as the landlord/seller, you may be asked by the tenant’s/buyer’s solicitors to complete commercial property standard enquiry forms. The relevant form will depend on the nature of your proposed sale (i.e., grant of lease; assignment of lease; sale of freehold). These forms are updated regularly to reflect ever-changing rules and regulations. In that regard, we will assist you in your answers to ensure that you are not unintentionally putting forward any misrepresentations as the seller/landlord.

If you are granting a lease to a prospective tenant, we will incorporate provisions to protect you in the event of default by the new tenant. We will obtain supporting references from your prospective tenant (and guarantor) to ensure they will be a responsible and satisfactory lessee so far as the rental and money-laundering regulations are concerned.

In preparing the draft lease, it will be necessary to consider the tenant’s proposed use of the property and since modern Use Classes are variably wide and we recommend limiting the permitted use to the specific use proposed by the tenant.

If you are selling your existing lease, it will be necessary to approach your landlord, as you will require their consent for the assignment of your lease. In that regard, we will ensure that the sale of your lease is concurrent with the sale of your business, should that be the case.

Conveyancing Solicitor Blackheath

At Beverley Morris & Co., based in Blackheath, south east London, we understand that your business venture is as important as your legal paperwork, and we strive to ensure that your legal papers are in place to keep up with ever-changing rules and regulations.

Whether you are looking for a place for your café, restaurant, retail store or office, whatever your personal circumstances, we are here to help.

We pride ourselves in acting, at all times, in the best interests of our clients so that they do not find themselves in a muddle down the road. After all, any future problems arising out of you and your Landlord/Tenant will depend much on the terms of the contract or lease you are entering into.

To find out more, call us today on 020 8852 4433, or email enquiries@beverleymorris.co.uk.

Alternatively, please fill in this contact form, and we will get back to you.

Author

Wing Shuen Ng – Trainee Solicitor

Buying a residential property can be a daunting process, yet purchasing a commercial property can heighten any apprehensions, especially for first-time commercial property buyers. Although it can seem complicated, it can also be very exciting. The best way to ensure your experience is as problem-free as possible is to conduct extensive research.

Here are a few points you should consider before purchasing your commercial property.

Flexibility

If this is your first commercial property purchase, it may seem scary, but always try to think ahead to the future. Do the premises have the potential for your business to expand? Where will your business be in two, five or ten years? Will your original premises remain large enough?

On the other hand, try not to buy more space than you need. Rent is expensive nowadays more than ever; if your business does not require the extra space, consider somewhere else. Alternatively, depending on the type of building, perhaps consider subletting.

Only in a best-case scenario might you find the perfect premises: perfect size, condition, and location. Often, you will have to make compromises to find what is best for your business.

Meanwhile, it would be sensible to consider some health and safety regulations that might prevent you from buying certain premises. For example, some regulations require employees to have enough space at work, so be sure to think about furniture layout and other factors that could interfere with employment law.

Should I lease or buy a commercial property?

Your business and financial situation should determine whether you rent or buy your business premises. For a small or new company, the best option is to opt for a short-term lease. Short-term leases allow you to know whether the space is suitable for you or whether there is too much or too little space. Ideally, you would negotiate a tenant’s right to break the lease before the term end date to be sure.

Long-term leases provide more security; however, always check if there are flexible options for subletting or development.

An older, more established, or larger company might wish to consider buying its premises. Often this is because the business is established in the local area, so they do not want to lose brand recognition by moving.

As an established business, there are benefits to buying a property which include:

• Cost-effectiveness
• Increased control over management and maintenance
• Freedom to adapt the property
• Ability to lease to a third party.

Liquidity

As with residential property, buying and renting commercial property brings very different experiences, both in complexity and financing.

It can be very easy to overspend when purchasing commercial premises; however, in the longer term, and depending on the type of company, it can be more beneficial.

Mortgage lenders ask for 20% of the property’s value, which could be unachievable for some, whilst landlords often require an upfront deposit, monthly rent, insurance rent, and service charges. Therefore, renting requires less capital to be invested but can be more costly in the long run.

There is no one correct answer to the approach one business should take when deciding whether to rent or buy premises. Again, be sure to research and weigh up each option’s advantages and possible disadvantages.

What is the best location for my commercial premises?

There is a trade-off between ideal location and financial viability. In the modern world, it is less essential for many businesses to be located in the centre of a busy high street – thanks to eCommerce and other technological advancements.

However, it is still paramount that your premises are located conveniently for employees, clients and suppliers alongside good transport links. That way, you are more likely to increase your customer base, benefit from solid logistics and provide a reason for employee retention.

It is best if you aim to review the location of your premises as often as possible so as to ensure that you are benefiting from all of the above.

Commercial Property Solicitors Blackheath

When you have decided on the route for your commercial property, get in touch with Beverley Morris & Co. commercial property solicitors in Blackheath Village, London.

Call us on 020 8852 4433 or email enquiries@beverleymorris.co.uk.