Repairs, defects and dilapidations
If you take the whole building, you will be required to keep it in good repair, including the structure.
If it is a new building, there is a fair chance the landlord will try to include inherent defects in your repairing responsibility. Take care – this would not be a repair but an improvement and should be resisted, whether as part of your own repairing responsibility or by way of a service charge contribution. If you are taking on an old building that is not in the best of repair, consider reducing your responsibility – draw up a schedule of condition and limit your responsibility to keeping the place in no better state than that.
The standard institutional lease will require you to make good any dilapidations within two months – or sooner – of a written notice being served. When was the last time you got a quote from a builder and actually got them to complete the job in just two months? Perhaps you should insist on an extension to the time period.
Rent reviews
Rent reviews will usually be on an upwards-only basis. If you can negotiate a break clause operable at the review date, you have the ability to threaten to leave if the review is not agreed in advance at a reasonable figure.
Take care the review is not based on an artificial figure that assumes the premises are ready to occupy and do not need to be fitted out at the time of review.
There is government pressure for greater flexibility in rent reviews – even for market rent reviews that could go either up or down.
The rules of this game are simple: heads, they win; tails, you lose
But remember: you really do get what you pay for. The more beneficial the lease, the greater the potential rent rise on review, depending on market conditions.
Service charges
Time was when the service charge was whatever your landlord cared to charge you. But things change and it is now more a tenant's market. Suggest a capped figure linked to RPI for the first five years of the term. The landlord will not be happy, but this should be achievable in the current market and give you budget certainty for a period.
Break clauses and subletting
The standard lease will let you assign or sublet the whole of your premises, subject to the landlord's consent.
Consider how much of your building you will need to be able to sublet. Take care that sublettings are permitted at open-market rents rather than at passing rents (those established when you took up occupancy).
A rent at passing-rent levels may not be achievable on a subletting. (There is a way around this, but it is not altogether satisfactory and is not assisted by recent case law). Also consider a break clause, ideally at the time of the rent review. Markets change and there may be no takers for your premises at a future time when you have grown in numbers and need to move. The world really can change in a day – another atrocity on the scale of 11 September would have a dire effect on market confidence.
Check you're covered
On the subject of 11 September, it's worth considering whether terrorism is covered by insurance. There is a terrorism bill before parliament that may change the concept for insurance purposes. And watch out for those risks that often are not insured against, such as subsidence. Ideally, insurance should cover any physical damage but watch out for exclusions and consider whether you should take further action to insure against these.
Source
Housing Today
Postscript
Allan Hudson is senior partner and head of commercial property at solicitor Devonshires, allan.hudson@devonshires.co.uk
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