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Q&A: tips for New Commercial Landlords

Some responsibilities and rights for commercial landlords and tenants are set in law, others are a question of exactly what is in the tenancy agreement. Because lease agreements are often poorly worded or full of ambiguity it’s essential for commercial landlords to manage their risk by getting professional legal advice to protect their interests.

Here are a few of the questions that typically arise, particularly for landlords new to the commercial property market.

What happens if there are existing tenants when I buy a commercial freehold?

When you buy a commercial freehold any existing tenants have the right to remain in the property on their existing terms and conditions until the end of the lease period. Make sure you fully understand the terms that apply.

What are break clauses?

On longer leases, there is normally a break clause that allows the tenant to end the agreement early after a specified number of years. The process for serving notice is specified in the lease and must be followed exactly.

Can I get rid of tenants when the lease term expires?

Normally tenants will have the legal right to renew their lease on the same terms unless you have specified in the lease that the relevant terms of Landlord and Tenant Act will not apply. There are some other specific instances where the automatic right to renew may not apply.

What does obligation to repair mean?

Your tenants will have to maintain the condition of your property up to an agreed standard. This will be specified in the tenancy agreement. If you suffer a financial loss (eg reduced rental value) because your tenant doesn’t maintain the property you could make a financial claim.

What is meant by dilapidations?

In order to restore the condition of your property to the agreed level, you can issue a schedule of dilapidations to your tenant. This specifies the work you expect them to carry out to bring it to the standard set out in the lease. These are typically served towards the end of a lease period.

How easy is it to recover any losses?

In practice it can be difficult, particularly if the lease agreement is poorly written, the original condition of the property is not documented in sufficient detail, or tenant’s obligations are not clear.

Can my tenant make alterations to the property?

It is normal for tenants to want to make changes to a property (such as erecting internal walls) to make the accommodation more suitable for their needs. Your lease agreement should make it clear what types of alterations are allowed and the formal process for approving any changes.

Can I stop my tenant subletting all or part of the property?

This is another area where clarity in the tenancy agreement is essential. Subletting can complicate the contractual relationship but may also help you retain a good tenant. Make sure your wishes are clearly stated in the tenancy agreement.

Can I charge whatever rent I think is appropriate?

No. Rents on commercial properties are supposed to reflect a fair market price. Your tenancy agreements may specify ‘upwards only’ rent reviews at specified periods but any increase may still have to be in line with an independent assessment.

There is no substitute for getting good advice and for having a tightly worded tenancy agreement that meets your needs and is fully relevant to the property. The experienced commercial property team at PowellsLaw will help you protect your investment and avoid potentially costly disputes with your tenants. Find out more here or contact us today on 01934 623 501.

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