A Tenant’s Commercial Guide to Leasing Property in Scotland

the lease. During this reinstatement period, the tenant is usually entitled to an abatement or 04 | negotiating a Commercial Property Lease in Scotland part B.
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Rent reviews can take place at whatever intervals are agreed between the Landlord and the Tenant when the lease is entered into. Usually, in modern leases they are around every three to five years.

When, after the Second World War, rent reviews first became popular, they were generally every seven or 14 years, but due to leases becoming shorter the intervals between rent reviews have become more frequent. Both parties should carefully consider when choosing an interval for the rent review. For the Landlord, there needs to be a balance between the advantage of the rent going up on a review and the cost of undertaking a rent review if the new rent is disputed and professional costs are to be incurred.

Assumptions and disregards are what the lease specifies that a surveyor must take into account when they are valuing the property for the purpose of a rent review. A common assumption that is contained in a rent review clause is that the Tenant has complied with all of its obligations under the lease. If the assumption was not contained in the rent review clause, then the property is likely to have a lower valuation because of its current condition.

This would be unfair on the Landlord. A common disregard is for the surveyor to ignore any improvement works the Tenant has carried out. This would be a double benefit for the Landlord as their property has been improved at no cost to them, and they get a higher rent going forward, however this scenario would be unfair on the Tenant.

The assumptions and disregards contained in any rent review clause should be carefully considered and professional legal advice should be taken. As demonstrated by the scenarios above, these clauses have the potential to cause real financial implications for either party in the future. Another point the rent review clause should deal with is what should happen if the Landlord and Tenant cannot agree on the new rent when a rent review takes place.

The Landlord will usually have served a notice on the Tenant which set outs the new rent, and if the Tenant does not agree and they wish to object, then they should ensure they stick to any deadlines contained within the notice or rent review clause. If agreement cannot be reached after some negotiation has taken place or at least been attempted , then the lease will usually provide for some form of dispute resolution or a third-party surveyor to be appointed.

The surveyor or arbitrator will value the property, consider the terms of the rent review clause and decide on what the market rent should be. Tenants should be cautious when there is a delay in determining the new rent. Once a new rent has been agreed, this can be backdated to the review date contained within the lease. If the rent has increased then the Tenant will be liable to pay the Landlord for the difference between the rent they have actually paid and the new rent. If negotiations go on for a few months or even years, then this could be a significant lump sum, and interest is often also due.

There are alternatives to the market value rent review. A rent review based on the RPI or a turnover is more common in the retail sector and means that if the Tenant is doing well, then the Landlord can receive a higher rent.

There are numerous ongoing responsibilities that fall on the tenant as occupier of the premises. These include various health and safety matters, responsibility as employer if you are taking over staff, asbestos control, fire safety, public liability insurance, which are all ongoing matters and which you as tenant in effect take over.

We can attempt to have the landlord prove to us that there are no breaches of legal responsibility , prosecutions or formal notices affecting the premises and therefore you after the date of entry prior to you taking over, but after that, you are liable to ensure that the business and premises are run lawfully.

Please read over the offer and missives following it to see how these matters are referred to. Please ask any questions you may have on these aspects.

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However, we are not health and safety experts nor employment lawyers, so you may need to take advice from other professionals to keep you right. Whilst you as a client may assume that you personally should be the tenant, you may prefer to consider the possibility of floating a new limited company or using one you already have as the actual tenant.

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This places the risk on the company so that if the business fails or you cannot, for one reason or another, continue the lease, then the landlord can only take enforcement action against the company and not against you personally. There are numerous factors to consider when deciding how to constitute or structure a business, but the purpose of this note is to get you thinking about the matter.

We are happy to discuss things further with you, and if appropriate to assist you in starting up a company. The less a track record of trading a company has, the more security a landlord may seek. This is important for the end of the lease period, or coming up to it. The principle of tacit relocation will apply where a landlord or tenant has failed to give the appropriate notice to terminate the lease.

If no termination notice is served, the lease will continue under tacit relocation on the same terms including the rent then payable, for a period of one year if the original lease was for a term of one year or more. If the term was for less than one year, it will continue for an equivalent period.

Tacit relocation will operate from year to year until the appropriate notice to terminate is served by either party. If the tenant has the right to end the lease early, there will be conditions attached to this. One thing that catches tenants is the state of the lease when the notice is given. Check the wording of any early termination clause very carefully, as depending on how the wording is done, if the tenant is in breach of the lease in any way either at the date of early termination or at the date of the notice, then the notice is invalid and the lease must continue to the end.

So you could be a few days late with the rent or not have carried out some repair and be stuck with however many more years there are on the lease. There are many more conditions and rules to be aware of. Your lease is likely to be at least 30 pages long, maybe much more, and while we do take you through the clauses to explain them, it is worth you sitting down with no distractions and reading through the lease and other documents issues to ensure you give yourself the chance to ask all questions you need to before you are bound into an onerous agreement.

No question will be regarded as stupid or a waste of time — becoming a commercial tenant is a very big step. You can also read our helpful guide below for more information. Common Issues for Commercial Landlords and Tenants It is important that we draw your attention to various matters that arise out of you becoming a tenant of commercial premises.

What is a Full Insuring and Repairing Lease? Survey of the Property It is certainly worthwhile getting a survey of the premises done. Schedule of Dilapidations Repairs In fact at the end of any lease a landlord issues a schedule of dilapidations which is a list of repairs needing to be done.

Concluding Missives for the Lease Prior to completion and execution signing of the printed lease, we will require to have concluded missives for the lease, constituted by a legal offer, acceptance and any further letters to agree all clauses. Ongoing Responsibilities for the Tenant as Occupier of the Premises There are numerous ongoing responsibilities that fall on the tenant as occupier of the premises. Whose Name is the Lease to be in? Make an enquiry Please complete all required fields! Please write a Telephone Number.

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