Property News has 100 free copies of A Tenant’s Practical Guide to Commercial Leases to give away. Just contact Stuart Darlington at darlingtonproperty@gmail.com and put "Property News book giveaway" in the subject line.
The overriding principle of English property law is let the “buyer beware”. The purchaser or tenant must take a property as he finds it, warts and all. Essentially, it is for the buyer or tenant to carry out his own due diligence and it is not for the seller or landlord to volunteer any information.
Leases usually compound a tenant’s liability due to a hidden obligation where the law implies an obligation to first “put” the premises in repair and then keep them maintained so the tenant is liable for any pre existing defects and disrepair.
Accordingly, in every case (except where the property being acquired is yet to be built) it is advisable to arrange for a survey to be carried out by a qualified surveyor. In addition, a full mechanical and electrical survey of all air conditioning (also air extract, ventilation and refrigerant cooling apparatus in the case of restaurant and bar premises), as well as lifts and other such plant and equipment is highly recommended.
In terms of the actual lease provisions there are a number of other considerations:
Where the landlord was under an obligation to the tenant to procure the construction of the premises before the lease is granted or where simply the property has been recently built, a tenant would usually expect to receive warranties from the contractor and professional team. These give the tenant a right of action against the provider of those warranties in respect of any breach of the terms of the building contract in relation to the contractor and breach of the terms of appointment of the other relevant professionals..
From a tenant’s perspective, the very least a tenant would want in respect of any new build is warranties. However, the preferred position would be for the landlord to be liable to make good those defects. The issue with warranties is whether there are any restrictions as to what defects the relevant warrantor may be liable for as contained in either the building contract or deeds of appointment. In addition, the tenant must ensure that where warranties are provided they are backed up by insurance. Otherwise, it may be the tenant has a claim under a warranty but the contractor is either insolvent or does not have the money to pay for the remediation of any defects. However, there is no guarantee that such insurance will be maintained. If it lapses this leaves the tenant exposed.
With the above in mind, the safest course is to insist that the tenant’s obligation is limited to preserving the premises in their condition as at the date the tenant takes occupation of the premises. This is usually achieved by a detailed photographic survey being undertaken by one party and agreed by the other, and referred to as a “schedule of condition”. However, landlords will not usually agree to this except where the lease is for a short term.
There are a couple of other surveys that are as important as the building survey:
The tenant should therefore request a Demolition and Refurbishment Asbestos Survey from the landlord. All owners and occupiers have a statutory duty to have conducted an asbestos survey but there is no requirement as to how intrusive that survey must be.
There are various other ancillary lease provisions that indirectly relate to the tenant’s liability for the repair and maintenance of the premises:
Similarly, if any kit or ducting on the exterior, or any other alterations for which planning permission would be required, does not in fact have planning permission, this will be the tenant’s liability to resolve.
This is an extract from A Tenant’s Practical Guide to Commercial Leases by Stuart Darlington who has written this jargon-free book for those engaged in negotiating or entering into commercial leases. The book focuses on the practical implications of leases in order to give a commercial advantage and avoid risks.
About the author
Stuart Darlington is a partner at Davenport Lyons and has been specialising in acting for retail, leisure and corporate occupiers for over 13 years.
*EXCLUSIVE Property News Reader Giveaway*
Property News has 100 free copies of A Tenant’s Practical Guide to Commercial Leases to give away. Just contact Stuart at darlingtonproperty@gmail.com and put "Property News book giveaway" in the subject line.
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