A tenant's guide to business leases

This is a guide to the principal terms of the Council’s standard form of lease for business premises. It is primarily aimed at tenants of commercial premises and does not cover agricultural property, grazing agreements or allotments. “We” “us” and “our” means the Council as landlord, “you” and “your” means our tenant.

Health warning

A lease is a legally binding contract between the owner (Landlord) and the occupier (Tenant) of premises. It sets out the rights and responsibilities of the parties. You are strongly advised to obtain legal advice before signing a new lease or agreeing to take over an existing lease.

Lease terms

The following information is simplified and intended for guidance only. The property is managed on behalf of the Council by the Estates Management – Operational team in Asset Management. They will try to assist you with routine queries but if you are
unsure about any aspect of your lease you should seek professional advice.

Definitions

These are the main definitions used in the Council’s current form of lease.

• Landlord – the owner of the property at the start of the lease. If we do not own the freehold there will be a Superior Landlord but your contract is with us. If we sell our interest we will notify you and the purchaser becomes your new landlord. 
• Tenant – the person or persons entitled to occupy the property at the start of the lease. 
• Property – the address of the property which is usually also shown on a plan attached to the lease. 
• Lease Period – the length of time for which the lease runs. It may be a fixed period or it may continue until brought to an end as detailed in the lease. 
• Use Allowed – this is what the lease allows you to use the property for. 
• Rent – this will usually be stated as an annual amount. Payments are normally due in advance by quarterly instalments every three months. If the rent is described as a peppercorn no payment is due for the period stated. The rent may be subject to VAT and you should check whether this is the case. 
• Rent Start Date – this is the date from which rent is payable. It will be the same as the start of the lease period unless a rent free period has been agreed. You may be asked to pay the first instalment of rent when you sign the lease. 
• Rent Days – the days on which instalments of rent are payable. 
• Rent Review Dates – the dates on which the rent can be reviewed. 
• Interest Rate – the rate at which we can charge you interest on late payment of any sums due under the lease.

Lease clauses

The lease will contain all or most of these clauses.

Payments

Rent can be paid by standing order or will be invoiced in accordance with the lease. Interest may be charged if payment is not received on the due date. In addition to rent you may also be required to meet the cost of insuring the property and for other costs such as a contribution to the cost of cleaning, repairing and maintaining things
that are shared with other premises. VAT will be charged where applicable. You may also be required to pay our legal costs for example where our approval is required to carry out alterations to the property. You will usually be responsible for Business Rates and where appropriate Council Tax.

Rent reviews

The lease may include rent reviews for example on every fifth anniversary of the start of the lease period. The rent may be increased if there has been any increase in market rents or it may be linked to an index such as RPI. If we cannot agree what the revised rent should be this will be decided by an independent valuer.

Use of the property

If you wish to use the property for something other than the use described in the lease you must first obtain our approval. We may not be bound to give this. You must also ensure that you have or obtain any other approvals that may be necessary for your proposed use such as planning permission.

Repairs

You will usually be responsible for repairing and decorating the property including the inside and outside of all doors, windows, glass, frames, shop fronts and fascias as well as repairing and maintaining services such as plumbing, heating and electrical systems. In some cases you will be responsible for all repairs including the structure and exterior of the building. It is important that you understand your repair liability. If in doubt you should seek advice.

In most cases you will be responsible for undertaking all repairs that are the tenant’s responsibility even if some work is required at the start of the lease. It is very important to be aware of this if you take over a lease (by “assignment”) from an existing tenant as you will become responsible for any repairs that the tenant has failed to complete as well as any that arise after you have taken over. You should always seek professional advice before taking responsibility for a lease and consider having a survey carried out by a Chartered Surveyor so that you know what costs might be incurred. If you fail to complete repairs that you are responsible for we may carry them out and recharge the cost to you.

Alterations

You must obtain permission from us before carrying out most types of alterations to the property. You must also obtain any other consent that is required such as planning permission and Building Regulations approval. In some cases certain work such as structural alterations are not permitted. Please speak to one of our Estate Surveyors for informal advice on what is required.

Transferring the lease

In most cases the lease can be transferred (“assigned”) to someone else with our agreement. We will undertake credit checks before deciding whether to agree to the transfer and we are likely to require a guarantor and/or a rent deposit to be provided. You will be responsible for paying our costs for considering a request to transfer the lease. Sub-letting (granting a lease to someone else whilst remaining the tenant of all or part of the property) is usually not permitted.

If you decide to sell your business you should discuss any proposal to transfer the lease with us before making a commitment to a third party. If the purchaser wishes to change the use of the property this may also require our consent.

Insurance

We will usually insure the property against fire and other risks and recharge the cost to you. You will be responsible for insuring glass and contents and for any other insurance that may be required such as public and employer’s liability. Occasionally the lease will make you responsible for all insurances in which case the buildings must be insured in joint names with us. Further information may be obtained from our Insurance Department.

Break clauses

In some cases the lease may contain a “break clause” which entitles you or us to end the lease period early by serving notice on the other party. The procedure and time limits will be detailed in the lease and must be followed strictly. You should seek professional advice if you are in any doubt about what to do.

Security of tenure

Most leases come within the provisions of the Landlord & Tenant Act 1954 which means that when the original lease period ends you will be entitled to a new lease except in certain circumstances. If the relevant sections of legislation are excluded (the lease is “contracted out”) you should receive a “health warning” advising you of the consequences of this. It is important to be aware if you do not have the right to renew and you should seek legal advice if necessary.

When the lease ends

If the lease is not being renewed and no other arrangements have been made you must vacate the property at the end of the lease period. You must remove the contents (except anything that belongs to us) and return all keys.

We will arrange for the meters to be read and you will be responsible for Business Rates (and Council Tax where appropriate), utility charges and all other property costs until your tenancy ends whether or not you move out early.

You must return the property in the condition required by the lease. We may have the property inspected close to the end of the lease period and provide you with details of what is required. If any work has not been completed when the lease ends we may recover the cost from you. If in doubt you should seek professional advice.

Further information

This is a simplified guide intended to help you understand your lease. Our Estates Management – Operational team will be happy to offer further assistance where possible but you should bear in mind that they act on behalf of the Council and cannot represent you.

Further information is available from GOV.UK and advice on how to find a Chartered Surveyor is available from the RICS.