When a landlord grants a lease of commercial premises to a tenant, the initial rent is negotiated and agreed between the parties. However, where the term of the lease is longer than a few years, the initial rent may not represent the true value of the premises for the whole term. Most commercial leases therefore contain a rent review clause allowing for the rent to change over time, to reflect the changing value of the premises and the lease.
Types of Rent Review:
The most common type of rent review clause provides for the rent to be reviewed to the best rent available on the open market – see Open Market Rent Review below. However, alternative forms of rent review include:
If you are negotiating and agreeing heads of terms to take a new lease (or a renewal of an existing lease) there are some things that you should bear in mind. This briefing note sets out some of the issues to consider in those negotiations, to put you in a stronger position and help you get a better deal.
The term (i.e. the length of the lease) needs to be long enough to provide you with the premises you need for the period you might reasonably need them, but not too long. This will depend on all the circumstances in each individual case. Remember that if you want to leave the premises before the end of the term and have no right to break the lease, it will be your responsibility to find a third party to assign the lease or sublet to (if permitted by the lease). You should assume that you will be liable for the rent and other liabilities under the lease for the whole term.
Owners and Purchasers of Commercial Property - Are you absolutely sure you have claimed all of your Allowable Capital Allowances?
The rules regarding the availability of capital allowances on the sale of commercial property changed significantly on 1 April 2014.
Under the new rules a purchaser of a second hand property is only entitled to claim allowances on second hand fixtures within the building, if the fixtures have been properly identified by the previous owner and recognised in their capital allowance computation.
If a previous owner has failed to make a claim for capital allowances, which is not an uncommon occurrence, the entitlement to those allowances will be lost for all future purchasers of the building.
However, significant opportunities for tax savings remain:
- First Purchasers of Second Hand Properties. Planning can be implemented to ensure that the first purchaser of a second hand property is entitled to the maximum amount of capital allowances, but the planning needs to be implemented before the purchase.
- Owners of Existing Commercial Properties. If you are an existing property owner, in particular if you have made improvements during your ownership of the property, you may be entitled to additional capital allowances. These can be claimed without needing to sell the property.
If you have any questions regarding the above or require any assistance, please do not hesitate to contact Debbie Turner on +44 (0)1372-461411.
Morgan Russell LLP Transferred to Dixcart Legal Limited on 1st May 2014
As from 1st May 2014, the business of Morgan Russell LLP (“Morgan Russell”) transferred to Dixcart Legal Limited (“Dixcart Legal”).
The partners at Morgan Russell worked together with international business advisors, Dixcart International Limited, to establish Dixcart Legal which is an Alternative Business Structure (“ABS”) regulated by the Solicitors Regulation Authority and the successor practice to Morgan Russell. Dixcart Legal is a subsidiary of Dixcart International Limited.
The ABS structure enables lawyers and non-lawyers to work together for the first time, allowing flexibility in terms of organisation and management.
The professional services available from Hillbrow House go beyond those provided by our fully regulated solicitors at Dixcart Legal and include the services available through Dixcart International. This can be of particular advantage to businesses entering the Western European market and/or operating in the UK for the first time.
All of the Morgan Russell lawyers and staff have joined Dixcart Legal and the professionals providing legal services, remain as prior to 1st May. The difference is that we have more resources for you to utilise; but only if you wish to do so.
We remain at our previous address at Hillbrow House in Esher, opposite Sandown Race Course and have the same phone number: 01372 461411.
Our Dixcart Legal website demonstrates the depth of commercial services (previously provided by Morgan Russell) that will continue to be available from Dixcart Legal.
Key Contact: Mel Smith
Landlords should be aware of a recent High Court decision that considered a right to park. The court granted eight tenants in a block of flats an injunction against their landlord, where their leases:
- Granted each tenant a right to use a designated car parking space.
- Reserved in the landlord's favour a right to redevelop neighbouring property as it saw fit despite such redevelopment affecting or diminishing light or air enjoyed by the tenants but did not expressly reserve the right for the landlord to vary the position of the car parking spaces.
This checklist sets out the exemptions from business rates for non-domestic properties.
- 100% relief for a continuous period of three months only.
- Changes of ownership during the three-month period do not trigger a fresh three-month exemption. The exemption applies to the property, not the person paying the rates.
- Short-term occupation of the property (of six weeks or less) by, for example, a tenant or licensee during the three-month period will be ignored. The three-month period and the business rates exemption will continue to run despite any short-term occupation. This rule prevents owners from gaining additional periods of rates exemptions by establishing a temporary letting.
- If the property is let or occupied for a period of more than six weeks, the rates exemption will end at the start of that period, but when the property becomes vacant again, a new exemption period can be claimed.
What is a break clause?
A break clause can be included in a fixed-term lease allowing either you or your landlord to terminate the lease early.
Exercising a break clause brings the lease to an end.
Depending on how your lease has been drafted, the right to break the lease may:
arise on one or more specified dates; or
be exercisable at any time during the term of the lease on a rolling basis.
A break clause may only be exercised if any conditions attached to it have been satisfied (for example, providing vacant possession). A break clause will be strictly construed by the courts and any conditions must be strictly performed.
What are dilapidations?
Dilapidations are items of disrepair in the context of leasehold property, where a tenant is in breach of its obligations to the landlord.
Most of the relevant obligations will be contained in the lease – mainly the covenant to repair, but also other covenants including those concerning redecoration, complying with statue, reinstating alterations and yielding up at the end of the term. Supplemental documents such as deeds of variation or licences for alterations may also contain relevant covenants which should not be overlooked.
This checklist sets out the key issues that a landlord should be aware of if a tenant fails to pay the rent due under the terms of a lease of commercial premises:
Introduction to Competition Law
Competition law (or antitrust law, as it is more commonly known in the US) is designed to protect consumers from anti-competitive behaviour by businesses, by:
- prohibiting agreements that restrict or distort free trade and competition
- prohibiting abusive behaviour (such as price fixing) by firms with a dominant market position, and
- supervising mergers and acquisitions of large corporations.