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Hello,I am just about to sign a new lease for a commercial

Hello, I am just about...

Hello, I am just about to sign a new lease for a commercial property. I run my business for nearly a year now and I just have manage to find a new place. So far I agreed with the landlord and the agency the following points: 1. Rental: £17,500 per annum (plus VAT if applicable) Payable monthly in advance. 2. Rent Free: 2 months 3. Lease Duration: 10 years 4. Break option: Option to break after 3 months if planning permission / license is not granted. A further option to break at the 1st and 2nd anniversary of the date of entry, on giving no less than 3 months notice. 5. Rent Reviews: May 2018 – upwards only (if break option not exercised) 6. Date of Entry: May 2013 (exact date of entry to be confirmed) 7. Use Clause: Proposed use – car sales/workshop etc. Note - tenant to satisfy themselves that all necessary planning and license consents exist for their proposed use. 8. Repairs / Insurance: Tenants liable 9. tenant can sub let the property 10. Legal Costs: Each party responsible for their own costs relative to the transaction. 11. Conditions: Satisfactory references/covenant information ********************** I would like to change points: 4, 5 and 8 my suggestions: 4 can break any time giving a 12 months notice 5 rent reviews after 10 years 8 landlord is responsible for repairs, tenant for the insurance Should I add/remove anything else which is important, what about deeds ? anything else ???? THANK YOU for your help. Michael

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Answered in 40 minutes by:
6/2/2013
Thomas
Thomas, Lawyer
Category: UK Property Law
Satisfied Customers: 7,637
Experience: BA (Hons), PgDip, Practising Solicitor
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Hi

Can you first tell me what you would like to change about the points you refer to?

Tom
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Customer reply replied 4 years ago

I would like to change points: 4, 5 and 8 my suggestions:


4. can break any time giving a 12 months notice


5. rent reviews after 10 years


8. landlord is responsible for repairs, tenant for the insurance


 


cheers

Hi,

Thanks.

Will you be granted a lease of an entire building OR lease of a unit within a building?

Tom
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Customer reply replied 4 years ago

Hello,


This is a lease of entire site. It is a yard with no buildings at all. We will build them later but the lease is yard only.


 


It's about 100 meters long and 50 wide with secure fence around it,


 


cheers


 

Hi

Thanks for your patience.

The first thing to say is that if you are leasing a piece of land intending to develop a building on it then a lease is really not a good idea.

The first reason is that if you develop a building on it then you will have radically increased the value of the land. However, your lease is only for ten years. When your lease runs out you will have no rights to the land with the building on it. It would create a massive legal mess. You will effectively be doing the landlord’s job for him by increasing the value of his land and leaving yourself with nothing.

It would be different if you were granted an Option to purchase the land and building as a whole at a later date, once you have occupied the land under the lease. You would need this to be a formal Option Agreement drafted and checked by a solicitor and cross checked against the lease.

You should not proceed with the Lease if you intend to spend significant sums in developing the site unless you have a formal option agreement as well. It would be a terrible idea to do so and you could lose lots of money. You need to be very careful.

You really need to instruct a solicitor, the path you are going down worries me right now.

Please remember to RATE my answer OK SERVICE, GOOD SERVICE OR EXCELLENT SERVICE or above if you are satisfied that you have received the correct legal advice (even if it is not the answer you wanted to hear), otherwise I do not receive any credit for answering your question.

If you are not willing to rate my answer as OK SERVICE, GOOD SERVICE OR EXCELLENT SERVICE then allow me to assist further by replying asking what clarification you require rather than rating my answer at levels below.

If you wish for me to provide you with further guidance on any question you may have in the future then please submit a further question to the board requesting me either by my profile or by marking your question. “FAO Tom”.

Kind regards,


Tom
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Customer reply replied 4 years ago

Hello,


Just to clarify few things:


 


Are the rest of the points ok ? should I add or remove anything ?


 


I understand that I must ask for a right to purchase ?


 


I am going to invest about 10.000 pounds during the first year of the lease, only to be able to sublet the remaining ground. I only need 1/5 of this yard for my business, but prices for a smaller places suitable for car sales and repairs in Tollcross area are bigger then the whole of this yard ( and its just 300 meters away form other dealers )


 


If I find tenants myself ( already have one paying 1200 a month ) then I don't pay a penny for my garage... in fact can earn a bit every month.


 


Should I in fact go for 6 year lease instead ?


 


Can you please comment all of what I just said ?


 


promise not to make to many follow up questions, I understand its only a brief advice for 22 pounds.


 


cheers

Hi,

The only way you should sign the Lease is if you can run your business from it and make a profit (albeit with sub-letting too).

If you will develop the property by building on it then you need to execute an Option Agreement with the landlord. You can agree on the rough terms of the option but you MUST get a solicitor to act for you in the execution of the option so that the monies you spend are secure because you know you can subsequently purchase the land/property.

You also need to check that you are permitted to sub-let according to the lease. There will be a clause on it in there, or there should be. You need to check that there is.

I would try and get a break clause in there to be honest because you never know how things might work out.

Generally a landlord will only agree to a tenant repair lease, if you can get out out of this then you'll be doing well but I would not expect you to be able to do so.

Similarly it's generally the case that the landlord insures and the tenant reimburses because if the tenancy doesn't and the landl is rendered useless without insurance then they are at a loss.

Rent reviews are typically around every three years.

Apart from that the term sound normal. You just have to honestly decide if it is suitable for what you intend to do.

Please remember to rate my answer.

Kind regards,

Tom

It's up to you how long the lease is for, I can't comment because I don't know your business plan.
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Customer reply replied 4 years ago

Hello,


The break clause is already there: after first 3 months, after 12 months and after 24 months, then is 2 years in advance.


 


We already have the car selling business next door so we will just move to the new place with existing business, also we will be able to have a proper mechanical garage to boost the income.


 


DO I REALLY NEED a solicitor to execute the right to purchase after 10years ? or it is just a matter of having that mentioned in the lease agreement ???


 


This is the last question after this answer I am going to give you a feedback as you have been really helpfull so far.


 


cheers

Hi

Yes, you do need a solicitor if you are going to have an agreement to purchase the property.

If you don't use one then the option could be invalid, which means that every penny of the money you spend on development is potentially lost. You will appreciate the need to avoid this and instrucitng a solicitor is the best way to do this.

Please rate my answer.

Tom
Thomas
Thomas, Lawyer
Category: UK Property Law
Satisfied Customers: 7,637
Experience: BA (Hons), PgDip, Practising Solicitor
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Thomas and 87 other UK Property Law Specialists are ready to help you
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Customer reply replied 4 years ago

Hello,


Thanks for your offer :)


 


Just one question:


How common or how difficult it is to get the landlord to agree with this purchase option written in the lease ?


 


can I ''demand'' that I should be paying whatever the current value is ? before I build all the workshops etc ?


 


cheers

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Customer reply replied 4 years ago

Sometimes I am just a bit afraid of making something silly here, its a big deal for me this lease but I think I really have planned this quite well.


 


cheers again

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Customer reply replied 4 years ago

I just did, so should be ok, currently waiting for his response

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Customer reply replied 4 years ago

thanks a lot for your help, if I have any more questions in the future I hope I can get back to you ( not going to abuse the system here ;) ) just a random question maybe but for now big thanks :)

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