Business owners: be wary when leasing premise

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News article

Business owners: be wary when leasing premises

August 2012

planning & construction news

Business owners who rent premises such as shops, offices and industrial units are urged to check lease terms properly when renting property as many are unaware of hidden obligations that could have significant financial implications further down the line.

The advice comes from Danny McEvoy, building surveyor at Fisher German, who has experienced an increase in tenants seeking advice for dilapidation claims from their landlords.
 
Danny comments “We are seeing more and more tenants who have entered into leases, then discover later that they were not aware of the terms they had agreed to. It is imperative that tenants check their leases carefully before signing them. I suggest that professional advice is sought from a building surveyor to ensure tenants are fully aware of their potential future liability.
 
“I dealt with a case recently where a tenant took on a lease for what he thought was to be a ground floor shop unit without realising it included the first floor as well. This had very serious consequences where the tenant was liable for the full repair of the first floor that had stood empty for over 10 years. It sounds like something that you would not miss when reading your lease, but it does happen.”
 
Discovering these issues before the lease is signed (pre-acquisition)is essential, although dilapidations advice is often provided on an interim or terminal basis. A Schedule of Condition is recommended at the outset to limit future potential liabilities. Some key points that landlords should consider are:
 
Pre-acquisition - identify initial and future repairing liability, due diligence, entry and exit strategy
 
Interim - identify ongoing repairing liabilities
 
Terminal - identify repairing liabilities within last 3 years of the lease, considering options and strategies for lease renewal or end
 
Final - identify repairing liabilities at the end of the lease, considering options and strategies for lease renewal or end, negotiation of financial settlement with other party. Tenants often do not realise they may have to realise what they have out in e.g. shop fit out
 
Schedule of Condition - an itemised schedule of each area of the property that can be attached to the lease to record the condition agreed by both parties
 
Danny concludes “This is occurring in all types of commercial property and I recommend that tenants seek professional advice from a building surveyor before entering into a lease as it could have significant financial implications in the future.”
 
For further information, please contact Danny McEvoy on 01244 409673 or email danny.mcevoy@fishergerman.co.uk
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