The risks associated with leasing property for your business across Shropshire, Staffordshire and the West Midlands.

By Tom Wellings Commercial property specialist

My work largely spans the towns and cities of Shrewsbury, Telford, Stoke, Lichfield, Tamworth, Stafford and Wolverhampton and the greater West Midland together with the areas in between.   The market for leasing property across these regions varies. In Telford there is a lot of high-quality commercial premises; it is a tenant’s market. In South Staffordshire the opposite is true, and in other parts of the region I cover, there is a mixed picture.

Where ever you are leasing, when you have found the perfect leased property that your business needs, and you don’t want to lose it. You know one thing that is likely to cause a property transaction to fail is delay. But you should also know that leasing a property over a long period can give rise to substantial liabilities to your business. You therefore must learn of those risks and manage them in the comparatively short time the lease is likely to complete. The article below is designed to allow you to begin to assimilate those risks straight away. Some of these risks are purely legal and some are purely commercial but many are both legal and commercial. Working with a commercially astute solicitor helps.

What rights does the property you intend to lease enjoy.

1. Does the landlord have the power to let the business to you?
2. Does the premises have sufficient planning permission for you to carry on your trade?
3. Are there covenants over the property that might impede your business?
4. What are the car parking and access rights?

I will lead clients through issues 1-3. Together we analyse car parking and access rights to be sure of avoiding disputes and disappointment down the line.

How long will the lease last.

There are two opposing risks here. A growing business or a shrinking business can often find its lease is no longer suitable. Conversely a business may find that goodwill begins to attach to the leased address, so losing the lease in the future may damage the business. So, the issues to take into account giving rise to risk are

1. The length of the lease, is it enough or too much?
2. The existence of break clauses and the terms on which they can be applied. (See also the next point below)
3. Whether the lease is to be excluded from the land lord and tenant act.

If your business is likely to become known by the place it trades then, avoiding any opt out from the Landlord and Tenant act will be important to you as this is likely to give you additional rights to extend a lease at the end of the initial term.

What are the repair obligations, the risks are these.

1. To keep a premises in its present state usually set out in a schedule of condition.
2. To bring the property into repair.
3. Tenant improvements.
4. If you do not keep a property in repair any break clause you serve is likely to be ineffective. So, a lack of repair could cost, say, 5 years more rent.

Licenses to alter

The risks are these,

1. If you alter a premises without permission, you may be asked to reinstate the premises to its original condition at the end of the lease, and
2. A failure to get a license to alter may affect the enforceability of any break clause.

Housing keeping

When you take on a new lease you need to be sure of things like

1. Insurance, and when to start to insure.
2. Signage rights.
3. The ability of the landlord to increase rent.
4. Ground rents.

Personal Guarantees

Many land lords will seek a personal guarantee from a small business. In areas where tenants have the upper hand these can more easily be avoided, and our advice always remains to reject any personal liability where ever possible.

I hope the above was informative. If you need to move swiftly on a lease please contact us.