Commercial lease negotiations

Negotiating a Business Lease


Negotiating a business lease 

Once heads of terms have been agreed the next step is for the landlord to issue a draft lease (or licence) for the tenant to approve. If the lease is to be very simple, with a low rent and a short term, the landlord may deal with lease negotiations himself. However, in most cases the landlord will instruct a solicitor to handle lease negotiations on his behalf.

What does the tenant need to do?

Unless the tenant is experienced in handling property transactions, he should appoint a solicitor to act for him. The solicitor will be able to advise the tenant on his liabilities under the lease and will seek to obtain the most advantageous terms for the tenant. The solicitor will also ensure that stamp duty land tax (SDLT) is calculated and paid and that any necessary Land Registry applications are made following completion of the lease. 

Tenant’s title investigations

The Tenant’s solicitors will check the landlord’s title documents to ensure that the landlord is the owner of the property and is entitled to grant the lease. The title documents should reveal whether there are any third parties whose consent is needed for the grant of the lease, such as a lender or a superior landlord. There may be other matters revealed in the title documents that the tenant needs to be aware of, such as a right of way affecting the property or restrictive covenants affecting its use. 

Pre-contract enquiries 

The tenant’s solicitor will raise pre-contract (or pre-lease) enquiries. These are designed to elicit information about the property from the landlord. The enquiries will cover a range of matters including the legal title, state of repair of the property and (if relevant) service charge information.

There is a set of standard commercial property enquiries promoted by the British Property Federation known as CPSEs (commercial property standard enquiries). The enquiries can be accessed free of charge at http://uk.practicallaw.com/6-502-2923?service=property.

The CPSEs are very detailed and may be felt to be over-complicated for a very simple transaction. For such a transaction, the tenant’s solicitors may choose to ask for replies to a limited number of the CPSE enquiries or they may produce their own bespoke enquiries form.

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