Commercial Property FAQs Continued…

Q: Do I have to replace items at the property that break during the term?

A standard commercial lease normally contains a tenant’s promise to keep the property and its fixtures and fittings in good repair and condition throughout the term of the lease. This obligation is normally interpreted to mean that the tenant will at the end of the lease hand the property back to the landlord in a state of repair and condition that would enable it to immediately let out to another tenant without being required to carry out any repair works at the property. Obviously during longer term leases this creates an obligation upon the tenant to repair items that may fail due to general wear and tear and over much longer term leases to update and replace items that have become beyond economic repair and replacement. It is therefore advisable that tenants should seek to limit their repairing obligations to keeping the property in no better state of repair and condition than it was at the outset of the lease and this condition should be evidenced by a professional photographic schedule of conditions. These schedules have the benefit of bringing a degree a certainty for both the landlord and the tenant.

Q: What happens if I fall behind with the rent?

Commercial rents are generally payable quarterly in advance or if the landlord is flexible by monthly instalLment payments. If you fall behind with rental payment a landlord has a number of options under the terms of the lease. In the first place the landlord will normally be able to charge interest at a penalty rate on the amount of rent that is outstanding. If the rent arrears continue and grow the landlord may decide to issue court proceedings to recover the rent arrears and interest as a debt or alternatively terminate the lease by re-entering the property and claiming all rent due for the remainder of the fixed term of the lease together with the outstanding arrears.

Q: Can I sublet the property if things don’t work out?

Commercial leases contain strict conditions on tenant’s abilities transfer or sublet leases. The detailed clauses would need to be examined. It is often the case that landlord’s consent is required to transfer or sublet and landlord’s will impose conditions such as you guaranteeing the future tenant or subtenant’s performance of the terms of the lease by standing as guarantor. You must take care not to be in breach of your lease by permitting a third party into occupation of the property before you have approached the landlord for consent.

Q: How long will it take for my company to buy an industrial unit?

The time estimate for completion of a commercial property transaction is entirely dependent on the following;
• status of the property being purchased i.e. its size and legal status whether freehold or leasehold
• the identity of the seller be it an owner occupier or administrator
• the size i.e. a small retail shop versus a 10,000 square foot industrial shed
• method of funding whether by bank finance, cash or pension fund
Broadly speaking an approximate estimate for a standard commercial transaction would be from instruction to exchange of contracts 6 to 8 weeks however this would be entirely reliant on the above points and any property specific factors.
Commercial property auctions have their own set time frames with the commitment to purchase made at the fall of the hammer and completion scheduled for 20 working days later.

Q:Can I pay a deposit direct to the seller to secure the property?

The simplE answer to this question is yes however we would strongly advise against this practice. We appreciate the commerciality of property transactions and the occasional need to secure a property by the down payment of a deposit however it would always be our advice that this deposit pass through solicitors client account and is formally documented. This is not only to ensure that there is evidence of payment of the deposit but also to ensure that these monies are ultimately deducted from the purchase price and to reduce the likelihood of delays at later stages in the transactions due to money laundering concerns.
At the stage a deposit is paid there is no guarantee that the person you are dealing with is the legal owner of the property or has the authority to sell. As a bare minimum holding deposits should be paid to any selling agents to be held strictly to a buyer’s order pending instruction of solicitors.

If you require any further assistance, please do not hesitate to contact our commercial expert:

Paul Westwell:
or Telephone: 0161 330 6821