Lease of Office over a Shop (with Security of Tenure)
This Lease of Office over a Shop (with Security of Tenure) is one of a number of leases for office premises that can be granted for a term of more than five years:
- Lease of Self-Contained Office Building (with Security of Tenure);
- Lease of Self-Contained Office Building (Security of Tenure excluded);
- Lease of Office(s) in a Shared Building (with Security of Tenure);
- Lease of Office(s) in a Shared Building (Security of Tenure excluded);
- Lease of Office over a Shop (with Security of Tenure);
- Lease of Office over a Shop (Security of Tenure excluded);
- Underlease of Part of Office Building (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 template was revised in 2017 to include provisions relating to energy efficiency.
This Lease should be used to let office premises for a term of more than five years where the office is above a shop. It is assumed that the office has its own entrance from the road and does not share facilities with the shop premises. Because of this, there is no formal “on account” service charge but there is an “ad hoc” service charge which is explained below. 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 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.
In Clause 1 (definitions) there is reference to the Building, the Common Parts, the Landlord’s Neighbouring Property, a Letting Unit, the Premises and the Retained Property. These terms describe the following areas:
- Building – the building in which the Premises are situated
- Common Parts – the parts of the Building which are not let to any tenants and which all tenants have the right to use (e.g. corridors, staircases)
- Landlord’s Neighbouring Property – property owned by the Landlord adjoining or near the Building
- Letting Unit – a unit of accommodation within the Building 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” which means that the Tenant is responsible for the plaster on the walls but not any structural parts of the Building
- Retained Property – the parts of the Building that are retained by the Landlord. This includes the Common Parts, any conduits and the structure of the Building.
This Lease includes an “ad hoc” Service Charge. The Landlord can carry out repairs and maintenance to the Retained Parts and recover the cost from the Tenant on an “as and when” basis. The Landlord can also recover from the Tenant the cost of providing any other services he reasonably considers necessary. The Landlord’s covenant in Clause 4.3 should be checked carefully and amended to reflect the services the Landlord actually intends to provide.
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, an Insurance Rent (to reimburse the Landlord’s buildings insurance premium) and the Service Charge.
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.
Clause 4 contains the Landlord’s covenants. These cover quiet enjoyment (the Tenant’s right to use the Premises without interference from the Landlord), insurance and repair and maintenance of the Retained Parts.
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 have 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, 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.
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 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 3.1.31 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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