Q: Will a lease contain any restrictions on how I can use a commercial property?
A: Usually, any restrictions on the use of the property will be set out within the terms of the lease. The lease will specify the permitted use of the property and it is therefore important to ensure that this use covers use for your intended purposes.
It is also essential to establish that the existing use of the property is authorised by consent or a certificate from the Local Authority. If you wish to change the use of the property, it is possible that planning permission may need to be obtained. However, changes from certain ‘Use Classes’ do not require planning permission.
Q: What will happen when my lease expires?
A: What happens upon expiry of your lease depends upon whether it is included or excluded from the security of tenure provisions of the Landlord and Tenant Act 1954 (“The Act”) and whether you wish to remain in the property.
Provided that the relevant terms of the Act have not been breached, The Landlord and Tenant Act 1954 gives a business tenant a statutory right to renewal and the right to extend the contractual term of the existing lease. However, this right to renew the lease will not arise if the Landlord wishes to move into, sell or redevelop the property.
If the lease is excluded from the Landlord and Tenant Act 1954, then the tenant will not have the statutory right to renewal and the Landlord will have the right to recover possession of the property after the fixed expiry date of the lease.
Should you decide that you do not wish to remain in the property after the expiry date of the lease, you must give notice to your Landlord in accordance with the provisions of the Landlord and Tenant Act. The lease may also contain an obligation on a Tenant to remove any alterations which have been made.
Q: How is Stamp Duty Land Tax (SDLT) calculated on leasehold transactions?
A: How the SDLT is calculated in a commercial lease transaction is dependent on whether it is a new lease or whether it is an existing lease.
Where the lease is a new lease, the SDLT payable depends on the premium and the rent payable under the lease. Where the lease is an existing lease, the SDLT payable is calculated based upon the purchase price of the property as if you had purchased the freehold.
Q: If I no longer want the property, will I be able to get out of my lease early?
A: In order to relieve yourself from all future liability in relation to the lease you will need to seek termination of the lease. Termination of the lease before its agreed date of expiry will be depend on the terms of the lease.
The most common way of terminating a lease is to exercise your break rights pursuant to a Break Clause. A Break Clause is a provision that is written into the lease, which will enable the Landlord and/or the Tenant to end the lease before the expiry date.
Should you not be able to terminate your lease in the above circumstances, it is possible that you can negotiate the termination of your lease with the Landlord. However, it should be noted that the Landlord has no legal obligation to accept termination of the lease in this way.
Q: If there is a rent review period, who determines the new rent?
A: The way in which the new rent will be determined will be specified within the lease. Typically, new rent will be agreed by the Landlord and the Tenant and, if they cannot agree, by a surveyor. The new rent will usually be determined based on the ‘open market rental value’ of the property at the date of the rent review. This ‘open market rental value’ reflects the rent that the Landlord would reasonably expect to receive if he was to lease the property to another party upon the same terms as your lease.
Advice about leasing or renting a commercial property
If you are considering leasing or renting a commercial property and need an expert commercial property solicitor to answer any questions that you may have, call us at our offices in Leicester, Hinckley and Market Harborough.
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