Lease of Industrial Unit on an Estate

This is a template Lease of Industrial Unit on an Estate, for letting industrial premises such as a factory, laboratory or workshop for a term of five years or less where the premises are on an industrial estate and a service charge is payable.

It is one of a number of five-year leases for industrial premises:

• Lease of Self-Contained Industrial Unit
• Lease of Self-Contained Industrial Unit (Complies with Lease Code)
• Lease of Garage or Workshop
• Lease of Garage or Workshop (Complies with Lease Code)
• Lease of Industrial Unit on an Estate
• Lease of Self-Contained Warehouse or Storage Unit
• Lease of Self-Contained Warehouse or Storage Unit (Complies with Lease Code)
• Underlease of Part of Industrial Unit on an Estate

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

The commercial leases contain clauses giving the landlord rights to ensure compliance with the Minimum Energy Efficiency Standards. Landlords should also refer to the Non Domestic MEES Flowchart and Checklist for information on landlords' obligations.

When to use this lease

Because of the short term, there are no rent review provisions. The Tenant's right to security of tenure is excluded (reference should be made to the Guidance Note on excluding security of tenure). Assignment of the whole of the Lease is permitted but underletting is prohibited. There are optional break clauses.

This Lease has Land Registry Prescribed Clauses at the beginning. These are not strictly necessary for a lease with a term of less than 7 years but they are included 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 10 (Guarantor's covenant) should be deleted.

Prescribed Clause LR4 makes optional reference to a plan. It is strongly recommended that a plan is included so that the extent of the property is clear. 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 Common Parts (a defined term in the Lease) and the areas over which rights are granted to the Tenant in the First Schedule to the Lease if these areas cannot be adequately described in words.

Permitted use and defined areas

Clause 1 contains definitions. The definition of "Permitted Use" makes reference to different Use Classes for premises in Wales and premises in England. For premises in Wales, it refers to Use Classes B1, B2 and B8: these are offices, research and development and light industrial uses (B1), general industrial uses (B2) and storage and distribution (B8). Class B1 no longer exists in England, where offices, research and development and light industrial uses now fall within Class E(g), so for premises in England the definition instead refers to Class E(g), B2 and B8. A surveyor will be able to advise on the uses that should be permitted under the Lease.

Clause 1 also defines the Common Parts, the Estate, a Letting Unit, the Premises and the Retained Property:

• Common Parts - the parts of the Estate which are not let to any tenants and which all tenants have the right to use (e.g. roads, paths, shared facilities such as lavatories)
• Estate - the industrial estate of which the Premises form part
• Letting Unit - a unit of accommodation within the Estate that is designed to be let to a tenant
• Premises - the property that is let to the Tenant under the Lease. The Tenant is given an "internal demise", meaning the Tenant is responsible for the plaster on the walls but not any structural parts of the building
• Retained Property - the parts of the Estate that are retained by the Landlord, including the Common Parts, any conduits and the structure of any buildings

Service charge, rent and the parties' covenants

This Lease includes Service Charge provisions. The definitions of Accounting Date, Financial Year, Initial Service Charge, Service Charge, Service Cost and Services all relate to the Service Charge, as do the provisions of Clauses 4.3 and 11. The list of services in Clause 4.3 must be checked carefully and amended to reflect the services the Landlord will actually provide.

In Clause 2 the Landlord grants the Lease to the Tenant. The Tenant must pay the Rent, an Insurance Rent (to reimburse the Landlord's buildings insurance premium) and the Service Charge.

Clause 3 contains the Tenant's covenants, covering payment of utilities charges, repair, decoration, safety, the Landlord's rights of entry, use, alterations, alienation (assignment and underletting), indemnity and payment of the Landlord's costs.

Clause 4 contains the Landlord's covenants, covering quiet enjoyment (the Tenant's right to use the Premises without interference from the Landlord), insurance and provision of the Services.

Other key clauses

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 and incorporates section 196 of the Law of Property Act 1925.

Clauses 7 and 8 contain optional break clauses (termination rights) for the Landlord and Tenant, and should be amended or deleted as appropriate. The Tenant's break option is conditional on rent having been paid up to date, the Tenant giving up possession of the Premises (i.e. vacating) and the Tenant not leaving any underleases 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, for example where 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 9 deals with exclusion of security of tenure. It is important that the correct procedure is followed when excluding security of tenure. Reference should be made to the Guidance on Excluding Security of Tenure and the associated forms.

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

The Schedules

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. Any additional rights required should be added to the Second Schedule.

The Third Schedule has a set of regulations the Tenant must comply with. Under Clause 3.1.31 the Landlord has the right to make further regulations from time to time for the better management and control of the Premises.

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