Lease of Self-Contained Industrial Unit (with Security of Tenure) (Complies with Lease Code)

This Lease of Self-Contained Industrial Unit (with Security of Tenure) (Complies with Lease Code) is one of a number of leases for industrial premises that can be granted for a term of more than five years:

• Lease of Self-Contained Industrial Unit (with Security of Tenure);

• Lease of Self-Contained Industrial Unit (Security of Tenure excluded);

• Lease of Self-Contained Industrial Unit (with Security of Tenure) (Complies with Lease Code);

• Lease of Garage or Workshop (with Security of Tenure);

• Lease of Garage or Workshop (Security of Tenure excluded);

• Lease of Garage or Workshop (with Security of Tenure) (Complies with Lease Code);

• Lease of Industrial Unit on an Estate (with Security of Tenure);

• Lease of Industrial Unit on an Estate (Security of Tenure excluded);

• Lease of Self-Contained Warehouse or Storage Unit (with Security of Tenure);

• Lease of Self-Contained Warehouse or Storage Unit (Security of Tenure excluded);

• Lease of Self-Contained Warehouse or Storage Unit (with Security of Tenure) (Complies with Lease Code);

• Underlease of Part of Industrial Unit on an Estate (Security of Tenure excluded).

There are also leases of other types of property and leases with shorter terms. If you are not sure which lease is right for you, please consult the Lease Comparison Matrix.

This Lease has been drafted so as to comply with the Code for Leasing Business Premises in England and Wales 2020, also known as the Commercial Lease Code. The Code aims to promote efficiency and fairness in dealings between Landlords and Tenants. The Code contains mandatory provisions relating to the negotiation of the heads of terms of the lease which must be followed if the lease is to be code compliant. The Code also contains good practice ‘good practice requirements’ for break clauses, assignment provisions, repairs, alterations and insurance and this Lease incorporates those requirements.

Landlords and/or agents who are members of, or who are regulated by the Royal Institution of Chartered Surveyors (‘RICS’) must comply with the Commercial Lease Code. If there is a departure from the good practice requirements, RICS members or regulated firms may be required to justify their decisions.

This Lease should be used to let industrial premises, such as a factory, laboratory or workshop, for a term of more than five years where the premises are self-contained and the Landlord does not provide any services. There are rent review provisions. The Tenant has security of tenure (for information about security of tenure please refer to the Guidance on Excluding Security of Tenure). Assignment and underletting of the whole of the Lease are permitted. There are optional break clauses.

This Lease has Land Registry Prescribed Clauses at the beginning. If the Lease has a term of more than 7 years these clauses must be completed otherwise the Tenant will encounter problems when it tries to register the Lease at the Land Registry. Leases with terms of more than 7 years are subject to compulsory registration at the Land Registry.

The Prescribed Clauses are not strictly necessary for a lease with a term 7 years or less but it is advisable to use them as they helpfully record the main terms.

Prescribed Clause LR3 includes a field for an optional Guarantor. If there is no Guarantor, this field can be left blank and Clause 9 (Guarantor’s covenant) should be deleted.

Prescribed Clause LR4 makes reference to a plan. A lease with a term of 7 years or less does not necessarily need to include a plan but it is strongly recommended that a plan is included so that the extent of the property is clear. A lease with a term of more than 7 years must contain a plan unless the letting is of the whole of the property comprised in the title number(s) referred to at Prescribed Clause LR2.

The plan should as a minimum show with red edging the property that is being leased to the Tenant. The plan may also need to show the areas (if any) over which rights are granted to the Tenant in the First Schedule to the Lease if these areas cannot be adequately described in words.

Clause 1 contains definitions. The definition of “Permitted Use” refers to Use Classes B2, B8 and E(g) for England and B1, B2 and B8 if the Premises are in Wales. B2 is general industrial use, storage and distribution (B8), and Commercial, Business and Service, Class E. Specifically, class E(g) is uses which can be carried out in a residential area without detriment to its amenity. A surveyor will be able to advise on the uses that should be permitted under the lease.

The Lease provides for a rent review to take place on specified dates (usually every five years). The Clause 1 definitions of Arbitration, Independent Expert, Open Market Rent and Review Date all relate to rent review, as do the provisions of the Fourth Schedule. The definition of Open Market Rent has two formulations for the length of the hypothetical term. The Landlord’s surveyor should advise on which formulation is appropriate in the current market. In Clause 2 the Landlord grants the Lease to the Tenant. The Tenant must pay the Rent and an Insurance Rent (to reimburse the Landlord’s buildings insurance premium).

Clause 3 contains the Tenant’s covenants. These cover matters such as payment of utilities charges, repair, decoration, safety, the Landlord’s rights of entry, use, alterations, alienation (assignment and underletting), indemnity and payment of Landlord’s costs.

Underletting of whole is permitted but not underletting of part. Whilst the Commercial Lease Code does not prohibit underletting of part, it is more common for subletting of part to be prohibited. The Code allows for landlords to impose stricter provisions regarding alienation where justified.

Clause 4 contains the Landlord’s covenants. These cover quiet enjoyment (the Tenant’s right to use the Premises without interference from the Landlord) and insurance.

Clause 5 contains various standard lease clauses including forfeiture and suspension of rent if the Premises are damaged so as to be unfit for use.

Clause 6 deals with service of notices by the Landlord and Tenant.

Clauses 7 and 8 contain optional break clauses (termination rights) for the Landlord and Tenant. These clauses should be amended or deleted as appropriate. The Tenant’s break option is conditional on rent having been paid to date, the tenant giving up occupation of the Premises (i.e. vacating) and the tenant not leaving any underleases and other occupiers in place. If these conditions are not satisfied, the Tenant’s break will not be effective, and the lease will continue. If the Tenant is in breach of other terms of the Lease, e.g. necessary repairs have not been carried out, the break will be effective but the Landlord will retain the right to sue the Tenant for any breaches of the Lease.

Clause 10 contains an optional clause where the tenant is granted an option to extend the term and continue the original lease, without interruption.   To be effective, the clause is conditional on the original tenant having complied with the lease terms and not giving up occupation.   For 1954 Act protected tenancies, the statutory right to renew at the end of the term will remain but where a tenancy has been excluded from the 1954 Act the tenant will need to negotiate a new lease with the landlord. 

The Lease must be executed as a deed. Various types of execution clauses are included, and the parties should choose the appropriate clauses.

The First Schedule sets out the rights that the Tenant has to use other property. These rights should be checked carefully and amended or deleted to suit the circumstances.

The Second Schedule sets out the rights that the Landlord has in respect of the Premises, including rights of entry and the right to carry out work to neighbouring property. If any additional rights are required they should be added to the Second Schedule.

The Third Schedule has a set of regulations the Tenant must comply with. Under Clause 3.1.32 the Landlord has the right to make further regulations from time to time for the better management and control of the Building.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

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