Commercial leases

Is a payment for dilapidations to be treated as an income or capital receipt?

Authored on September 14th, 2017

Virtually all leases have clauses which stipulate that when the lease comes to an end, the tenant must leave the premises in the same condition as they were in when they entered them, and the negotiations over the termination of a lease will often involve a payment by the outgoing tenant to take account of the dilapidations.

In principle, the payment from the tenant to the landlord is to put the landlord back in the position it was in at the commencement of the lease: restoring the asset (the leased premises) to its former condition.

Prescriptive Rights of Way – The Absence of Permission Is Vital

Authored on August 21st, 2017

Rights of way across the land of others can become established if they have been used openly and without force for at least 20 years. However, such use must also be without permission and, as one case showed, that can often prove a sticking point.

The owners of land on which a workshop stood claimed a vehicular right of way over an adjoining yard. The First-tier Tribunal (FTT) found that the yard had been used as a means of vehicular access to the workshop for the required 20-year period.

Be careful what occupation rights you grant

Authored on July 16th, 2017

The law is replete with cases in which two parties to an agreement differ in their interpretations of what they had agreed. Such disagreements can have profound implications for landlords as there are many legal rights attaching to the occupation of property.

Penal Landlord and Tenant Agreement Struck Down by High Court

Authored on April 27th, 2017

Penal contractual terms that seek to impose exorbitant or unconscionable obligations are generally not worth the paper they are written on. The High Court found one such term unenforceable in the context of a side letter to a retail lease.

A tenant had taken a 15-year lease of shop premises at an initial rent of £110,000 a year, subject to upwards only rent reviews every five years. On the same day as the lease was executed, a side letter was signed whereby the landlord agreed to accept a reduced rent of £90,000 in the first year, rising to £100,000 in year five.

Rates and 'Reasonable Repair' – Supreme Court Ruling

Authored on March 27th, 2017

With changes to business rates upon us, property valuation is very much a live issue.

A recent dispute between a property owner and the local rating office has confirmed the principle that if a property is not in a reasonable state of repair, it is to be valued as it is, not as it ‘should be’, or as the Supreme Court put it: 'Does a commercial building which is in the course of redevelopment have to be valued for the purposes of rating as if it were still a useable office?'

Landlord Pays for Failing to Mention Asbestos in Pre-Contract Responses

Authored on March 27th, 2017

When selling or leasing property it is absolutely vital to answer pre-contract inquiries accurately and the consequences of not doing so can be severe indeed. In one case, a tenant of warehouse premises was awarded seven-figure compensation after asbestos was discovered shortly after the lease was signed.

Landlord Sees Off ‘Sham’ Comparable Rent Accusation

Authored on January 26th, 2017

Making comparisons between similar properties is the standard means of assessing appropriate levels of rent payable on commercial premises. The practice came under scrutiny by the Court of Appeal as a landlord defeated claims that it had entered into a sham lease at an artificially inflated rent in an attempt to push up its returns on other properties that it owned.

Lease Break Fails Over Partition Permanence

Authored on October 25th, 2016
House Key

Commercial leases normally contain a provision that if a tenant wishes to break the lease, they must remove all their property (chattels in legal parlance) from the let premises. Such provisions will often, but not always, require the removal of any alterations made to the property with the agreement of the landlord, other than any the landlord accepts need not be removed.

Tenant Entitled to Relief from Forfeiture

Authored on August 23rd, 2016

If a landlord forfeits a lease on the grounds of rent arrears it is generally accepted that the tenant can apply for relief from forfeiture within six months of the date of forfeiture. Providing the tenant pays all the arrears and the landlord’s costs and the application is made within six months, the tenant usually obtains relief from forfeiture and the lease is reinstated. This six month period can however cause problems for landlords as it creates a period of uncertainty before the property can be re-let without fear of the tenant applying for relief.

Failure to Keep Tenant Informed Means Notice Valid

Authored on July 26th, 2016

Landlords can often move their offices several times during a long lease, meaning that the original address for service of documents on them becomes obsolete.

When a landlord does so, it is important for them to inform their tenant(s) properly and not rely on the fact that communications may have subsequently passed between them at the landlord’s new address.

A recent case illustrates the point. It involved a tenant that wished to exercise its right to break its lease and so gave notice to that effect to the landlords at the address set out in the lease.

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