Content of a lease: Term, Rent, Alteration & use -
Landlord objectives-
The LL of a commercial lease will wish to ensure the premises is:
Insured
Repaired
Only used for the permitted purpose
-
Tenants objectives-
To ensure there are no restrictions in the lease preventing the use of their intended purpose
To ensure rent does not rise to steeply + no onerous provisions
To ensure it can sell / assign
-
Term & Break clauses-
Generally for a fixed term
The term need not begin the same day as the grant of the lease
Landlords often prefer the terms of all the leases in a development to begin on the
same date. You will therefore often come across leases whose term begins earlier
than the date of the grant. For example, the term is usually expressed to start on
the ‘quarter day’ preceding the date of the lease. The usual quarter days are 25
March, 24 June, 29 September and 25 December. These are also the dates on which
rent is normally paid. So it is common for a lease dated, for example, 10 October
2019 to have a term expressed to be ‘10 years from and including 29 September
2019’.
-
Landlord & Tenant Act ‘54-
Commercial lease will be protected, unless opted out
-
Break clauses-
Term may be subject to a break clause to end the lease before the contractual expiry date
Details of the break clause must be agreed as part of the negotiations prior to
the grant of the lease.
The lease will stipulate how it is to be exercised
Break clauses often specify conditions for the operation of the break, such as:
, The tenant must have paid all the rent (or all payments due under the lease);
The tenant must have performed all its covenants.
Where tenant break clauses are made conditional upon the tenant having complied
with all covenants which extend to the repairing obligations, it will be virtually
impossible for the tenant to terminate the lease as it is unlikely that the standard of
repair will ever be perfect in the eyes of the landlord.
Recommendation 3 of the Code suggests that the only pre- conditions to tenants
exercising any break clauses should be that they are up to date with the annual
rent; give up occupation; and leave behind no continuing underleases. Disputes
about the condition of the premises, or what has been left behind or removed,
should be settled later (as with normal lease expiry).
--
Rent-
When and how is rent paid?-
Rent paid under a lease will depend on whether it is a market lease or a long lease
Market rent = 3,5 or 10 years long
o Monthly or quarterly rent
Long leases = max 99 years
o Reserve a nominal rent
A tenant may try a reduce the amount of rent paid
e.g.: LL is in breach of its repairing obligation and the tenant carries out the
repairs itself and then seeks to reduce its payment of rent accordingly
(deduction of costs) or
where a LLs breach of covenant causes loss to the tenant and the tenant
reduces its rental payment to recover such loss (set-off).
The landlord may try to stipulate that the rent is to be paid ‘without deduction or set
off’ to counter any rights a tenant may have to reduce the rent payable.
Commercial landlords often still require that annual rent is paid in four equal
payments
the rent payment days are often expressed to be the ‘usual quarter days’:
o 25 March, 24 June, 29 September and 25 December.
o Although other days can be given
The lease should also specify the manner in which payment should be made - & if it
is in advance or arrears
In absence, the presumption is that it is in arrears
The lease will usually allow a grace period for payment of the rent (usually 7, 14 or
21 days).
Landlord objectives-
The LL of a commercial lease will wish to ensure the premises is:
Insured
Repaired
Only used for the permitted purpose
-
Tenants objectives-
To ensure there are no restrictions in the lease preventing the use of their intended purpose
To ensure rent does not rise to steeply + no onerous provisions
To ensure it can sell / assign
-
Term & Break clauses-
Generally for a fixed term
The term need not begin the same day as the grant of the lease
Landlords often prefer the terms of all the leases in a development to begin on the
same date. You will therefore often come across leases whose term begins earlier
than the date of the grant. For example, the term is usually expressed to start on
the ‘quarter day’ preceding the date of the lease. The usual quarter days are 25
March, 24 June, 29 September and 25 December. These are also the dates on which
rent is normally paid. So it is common for a lease dated, for example, 10 October
2019 to have a term expressed to be ‘10 years from and including 29 September
2019’.
-
Landlord & Tenant Act ‘54-
Commercial lease will be protected, unless opted out
-
Break clauses-
Term may be subject to a break clause to end the lease before the contractual expiry date
Details of the break clause must be agreed as part of the negotiations prior to
the grant of the lease.
The lease will stipulate how it is to be exercised
Break clauses often specify conditions for the operation of the break, such as:
, The tenant must have paid all the rent (or all payments due under the lease);
The tenant must have performed all its covenants.
Where tenant break clauses are made conditional upon the tenant having complied
with all covenants which extend to the repairing obligations, it will be virtually
impossible for the tenant to terminate the lease as it is unlikely that the standard of
repair will ever be perfect in the eyes of the landlord.
Recommendation 3 of the Code suggests that the only pre- conditions to tenants
exercising any break clauses should be that they are up to date with the annual
rent; give up occupation; and leave behind no continuing underleases. Disputes
about the condition of the premises, or what has been left behind or removed,
should be settled later (as with normal lease expiry).
--
Rent-
When and how is rent paid?-
Rent paid under a lease will depend on whether it is a market lease or a long lease
Market rent = 3,5 or 10 years long
o Monthly or quarterly rent
Long leases = max 99 years
o Reserve a nominal rent
A tenant may try a reduce the amount of rent paid
e.g.: LL is in breach of its repairing obligation and the tenant carries out the
repairs itself and then seeks to reduce its payment of rent accordingly
(deduction of costs) or
where a LLs breach of covenant causes loss to the tenant and the tenant
reduces its rental payment to recover such loss (set-off).
The landlord may try to stipulate that the rent is to be paid ‘without deduction or set
off’ to counter any rights a tenant may have to reduce the rent payable.
Commercial landlords often still require that annual rent is paid in four equal
payments
the rent payment days are often expressed to be the ‘usual quarter days’:
o 25 March, 24 June, 29 September and 25 December.
o Although other days can be given
The lease should also specify the manner in which payment should be made - & if it
is in advance or arrears
In absence, the presumption is that it is in arrears
The lease will usually allow a grace period for payment of the rent (usually 7, 14 or
21 days).
