If you are a landlord or a tenant agreeing a new commercial lease and there is no commercial agent negotiating this for you then it is often helpful to agree a basic heads of terms with the prospective tenant or landord. This will reduce the chance of a late issue scuppering the deal and assist your lawyer in drawing up the lease in the most cost effective way becuase your initial instructions are comprehensive and clear.

Below is a list of questions we use for our own clients to help us obtain those initial instructions.

We are happy to assist in drafting your commercial lease and supporting documents and we will often be able to give you a fixed price if you call.

1. Parties
   1. What is the full name of the Landlord.
   2. What is the full name of the Tenant (Note if this tenant is a new company you may wish to consider a guarantor and/or rent deposit as below).
   3. Is the tenants obligations being guaranteed by a third party (a guarantor) (Note a personal guarantor (usually a director or shareholder) is usually required where the Tenant is a company unless well established or if the tenant has not traded previously).
   4. Does the Landlord have a lender on the property – if so please provide details including the account number (Note the lenders consent will be required to grant of the lease).
2. Property
   1. What is the full postal address of the property.
   2. Is this limited to a floor level or levels?
   3. Can you provide a of the property to be demised identifying any common areas or parking etc. plan (Note a plan is required for all leases over 7 years which needs to be compliant with Land Registry requirements)
3. Term
   1. How long will the lease be for?
   2. Is the lease to be excluded or include security of tenure provisions of Part II of the Landlord and Tenant Act 1954 (Note if excluded the tenant will have no right to remain in the property at the end of the term).
   3. Will there be a break clause? If so will this be tenant only or landlord only or either way and what basis? (Note: normally a break provision will require 6 months prior notice of a break and as a condition of the break all rent must be paid up and for a tenant vacant possession given on the break date)
4. Rent and rent review
   1. What is the starting rent?
   2. Is there VAT payable on the rent ? (Note: you need to charge VAT if you are VAT registered and have opted to tax the property – check with your accountant if unsure).
   3. Will there be any rent free period – if so how long? (Note: traditionally the rent free may be given to the tenant to fit out the unit).
   4. Will there be any rent review – if so what is the frequency of the review and what is the basis of review (Note: the most common rent review is a 5 yearly upwards only review on a “open market basis” but sometime there are Retail Price Index or fixed increase reviews).
5. Rent deposit
   1. Will the tenant pay a rent deposit? – if so how many months rent will this be. Normally this is held by the landlord until the lease ends or is assigned by the tenant with the landlord’s consent.
6. Services and service charge
   1. Is there any service charge on top of the rent (for the maintenance of the remainder of the building or site). If so is this ad hoc or do you have formal accounts.
   2. How is the service charge to be calculated/charges i.e. will it be based on the floor area of the property or calculated as a fair proportion / fixed percentage [ ] % of the total service expenditure.
   3. Will there be any cap on those service charges (Note: this may be applicable to shorter leases)
7. Insurance
   1. In addition to rent, we assume the tenant must also pay insurance premiums (Note:  they will pay for the building insurance which would normally include 3 years loss of rent).
   2. We would expect the landlord to insure the property and the tenant will refund the premiums (or a fair proportion in a shared building) on demand. If you wish to fix the percentage [ ]% please advise.
8. Use
   1. What will be the permitted use of the property be e.g. retail shop.
   2. Can the tenant can change the use of the property with the landlord’s prior written consent which cannot be unreasonably withheld.
   3. Do you want to include any specific restrictions on change of use e.g. no take aways.
9. Assignments and underleases
   1954. Normally the lease would permit the tenant to assign or underlet the WHOLE lease with the landlord’s prior written consent, which cannot be unreasonably withheld. The tenant will always be required to give an authorised guarantee agreement in respect of any assignee of the lease. Any underlettings would normally be contracted out security of tenure provisions of Part II of the Landlord and Tenant Act 1954. Please confirm if this is intended.
   1955. Can the tenant assign or underlet part of the property – normally this is prohibited.
10. Repair
    1. The lease will be a full repairing lease (in the case of the lease of the whole building with the tenant responsible for all repairs or in a the case of the part of a building with the tenant directly responsible for all internal repairs and responsible under the service charge for the cost of all other repairs).
    2. Have you agreed with the tenant to annex a schedule of condition to the lease to limit their repair obligation to the condition the property is in now?
11. Alterations
    1. Will the lease prohibit the tenant from making any structural or external alterations to the property?
    2. Will the lease allow the tenant can make internal alterations to the property with the landlord’s prior written consent, which cannot be unreasonably withheld?
    3. Will the lease allow the tenant can put up signs on the outside of the property or that would be visible from the outside of the property with the landlord’s prior written consent, which cannot be unreasonably withheld.
12. Works
    1. Please give details of any tenants or landlords works required to the property.
    2. Will the landlord be required to issue a licence for alterations for any such works?
13. Costs
    1. Will the tenant be responsible for your costs/ Is this limited to aborted costs (payable only if they do not proceed – this is a good way to test the commitment of a tenant) or will each party pay their own legal costs.
14. Lawyers
    1. Who is acting for the other party in this matter (email address and name of the lawyer acting also preferred).
15. Special Terms
    1. Are any other terms which have been agreed between you.

If you require assistance in drafting a commercial lease (including preparation of a rent deposit deed and guarantee) please contact Fred Rylah fred.rylah@ker.co.uk or Andrew Lutterloch andrew.lutteloch@ker.co.uk or Mark Sadler mbs@ker.co.uk on 01708 757575 for a quote.