The business lease (whole of building)

If you own the freehold to business premises, then you might, at some stage, want to rent out to a tenant. To do this properly and make your life easier, you’ll need a business lease drawn up. Use our form of lease to enable you to do this safely.

Why bother putting it in writing?

Because if you don’t and there’s a dispute it’s your word against the tenants. It’s better to get things put down in “black and white” now, rather than risk a costly legal dispute later. Note. Even if there’s nothing written down, provided there’s a fixed period of time, rents being paid and the tenant has exclusive possession, there’s still a lease (in legal terms).

What should I include?

As a business lease is a commercial document, everything’s “up for grabs”. It really boils down to each party’s negotiating strength as to which terms go in and which terms are either omitted or watered down. In any well drawn up lease you’d expect to find the following terms:

• the length of the term

• the rent

• who’s responsible for repairs

• who’s going to insure

• whether the tenant can assign or underlet the whole or part

• what the property can be used for

• whether the tenant can carry out alterations.

Tip

If you ever consider renting out your business premises, don’t forget about the impact of the Landlord and Tenant Act 1954 (“the Act”). The Act particularly affects what happens when your lease ends. In a nutshell, it’s not unusual to find that even though the lease has come to an end, if the Act applies, the tenant can automatically stay on indefinitely.

If you don’t want the Act to apply, as long as the tenant agrees, it’s possible for your lease to “contract out of the Act”. This can be done by serving a “health warning” contained in a notice to the tenant prior to the new lease being granted. The effect of the Act not applying will be that when the lease ends, the tenant has no right to stay on and must leave. Leases that are “contracted out of the Act” are sometimes not attractive to tenants and consequently may command a lower rent.