Commercial Property FAQs

1. What length is a standard commercial lease?
Historically leases had tended to be for terms of between 10 and 20 years however the current norm is for leases of an average of 3 to 5 years. This shift reflects a reluctance on the part of tenants to commit to long term liabilities and flexibility from landlords who do not wish to see properties stand empty and be responsible for the resultant rates and other property outgoings.

2. Will I need to decorate the property when the lease ends?
The majority of leases contain both a repair obligation and a decoration commitment. In longer term leases (of say 10 to 15 years) tenants are generally required to decorate the property once every say 3 to 5 years and also within say the last 3 months of a fixed term or in short term leases landlords generally will accept tenants decorating the property in the final 3 months of the term. All decoration at the end of the term is normally to a standard and a colour approved by the landlord. You must as a tenant ensure that you are aware of your obligations before signing a lease as you may also be required to say replace floor coverings or other consumables at the property.

3. Who pays for the buildings insurance?
It is standard practice for landlords to put in place buildings insurance cover throughout the term of the lease and to recharge this cost to tenants by what is called insurance rent. Insurance rent is normally payable annually and on demand by the landlord. In order to manage cash flow more appropriately it may be wise for landlords and tenants to spread the cost of insurance with monthly or quarterly payments throughout the year. Tenants should ensure that they obtain a copy of the insurance policy schedule and premium receipt at the outset of the lease and during the term.

4. How will the rent be reviewed or increased during the term?
Shorter term leases are generally for a fixed rent for the duration of the term although it is not uncommon for rents to be stepped increasing by pre-agreed amounts on each anniversary of the date of the lease. Whereas in longer term leases it is more common to find upwards only market rent review clauses. In the latter case the landlord and tenant attempt to agree a new rent at a given rent review date. If they are not able to agree a new rent then the matter would be referred to an independent expert who is normally a surveyor to review all matters concerning the property and the market within which it is situated to arrive at a rental figure to be paid until the date of the next rent review. Due to the recent economic conditions many upwards only market rent reviews have resulted in rents remaining the same as landlords have not wished to jeopardise tenancies.

5. Can I terminate the lease at any time?
Generally no. Leases are granted for a fixed term and unless a tenant has the benefit of a break clause then you must continue to pay the rent and abide by the terms of the lease until the fixed term expires. Whilst it may be possible to negotiate an early vacation of the property this will often involve the payment of a premium to the landlord on most occasions being a multiplier of the rent paid. It is therefore advisable for tenants to negotiate a break clause when agreeing the lease terms although such clauses are often resisted by landlords.

If you have any further questions, please do not hesitate to contact our expert:

Paul Westwell:

Or contact us by telephone: 0161 330 6821