Commercial Landlord and Tenant

Heads of Terms are often produced by letting agents and document the principal terms of a lease that have been agreed between the landlord and the prospective tenant. The Heads of Terms form the basis of the main terms set out in the lease and cover issues such as:

• The term of the lease;
• Rent, rent deposits and rent reviews; 
• Whether or not the lease is to be excluded from the security of tenure provisions in the Landlord and Tenant Act 1954; and
• Any other terms that are not always found in every lease such as: a break clause; rent free periods; or works to be carried out at the property. 

The Landlord’s solicitor will usually draft the lease to be reviewed by the tenant and/or its solicitor based on the agreed Heads of Terms. We recommend that you send your solicitor a copy of the draft Heads of Terms before the document is agreed to ensure that the terms accurately and appropriately reflect your objectives for the transaction.

A schedule of condition is a record (usually photographic, supported by additional written descriptions) that details the condition of a property at the time that the tenant is granted a lease. This is then annexed to the lease on completion. The reason that tenants will opt to have a schedule of condition done is to limit the repair liability in the lease to the condition of the property at the start of the lease. The tenant repair clause in the lease is then caveated by reference to the schedule of condition i.e. the tenant is not required to put the property into any better state or condition than as evidenced by the schedule of condition, which emphasises the importance of having an accurate schedule of condition.

Security of tenure is the statutory right pursuant to the Landlord and Tenant Act 1954 for a tenant of business premises to renew its lease at the end of the contractual term set out in the lease. Landlords can only oppose the tenant’s statutory right to a new lease on a limited number of grounds and must serve notice on the tenant of its intention to do so.

The general presumption in rent review clauses is that time is not of the essence, although most leases expressly state this for the avoidance of any doubt. This means that if the Landlord fails to exercise its right to exercise a rent review before the rent review date stipulated in the lease, the right is not lost. Once the reviewed rent has been agreed, it is often common for tenants to have to pay the shortfall from the rent review date in the lease up to and including the date that the reviewed rent is agreed.

We would always recommend that searches are commissioned against a property whether this is for a purchase or lease transaction, as searches may reveal important information that could potentially impact your proposed use of the property as a tenant. For example, the property may not have the appropriate planning permission for your proposed use and you therefore face the possibility of enforcement action being taken in the event that you as tenant are in breach of the property’s planning permission.