Commercial Property

Landlords should consider:

• Improvements“ if the property is sub-standard, have all relevant energy efficiency improvements been made?
• EPC’s - the timing of an EPC may be critical if the result is that the property is sub-standard. To retain control, a landlord may consider placing restrictions on a tenant’s ability to commission an EPC. It may also be appropriate to firstly obtain a draft EPC.
• Foresight planning ahead and also considering that in the future the minimum standard may be increased.
• Relevant date- it is important to determine which relevant date applies. This is particularly important for extensions or lease renewals where the tenant has remained in occupation.
• Improvement costs the cost of relevant energy efficiency improvements where the property is sub-standard.
• Non-compliance may result in enforcement action (including fines and public exposure) and a decrease in the property value. As an existing lease will continue, it may also impact matters such as rent review.
• Onerous lease the rental amount a tenant may be willing to pay may decrease if the lease clauses are too onerous.
• Consents are any third party consents required such as a lender or head-landlord?

Tenants should consider:

• Sub-standard if the property you are letting is sub-standard the landlord may be exposed to enforcement action. As the lease itself will continue, rent should be paid and all covenants continue to be observed.
• EPC’s there may be situations where a tenant would need to commission an EPC, for example on lease assignment, and the lease should reflect this.
• Improvement costs does the lease allow the landlord to recover the cost of undertaking relevant energy efficiency improvements from the tenant?
• Improvement works does the lease require or allow the tenant to carry out energy efficiency improvement works to prevent the property from being sub-standard?

You can usually transfer a commercial lease to someone else if you have the permission of the landlord. This can be done by way of a process called assignment.

However, some leases includes clauses that absolutely forbid commercial lease transfer. So, getting the right legal advice is important both before you enter into the lease and before starting the assignment process.

Read more here.

Most leases restrict assignment and require the written permission of the landlord before assignment can take place.

First, the tenant needs to find someone to take over the lease (referred to as the ‘assignee’). Next, the tenant should obtain consent from the landlord if they agree, they will usually provide a Licence to Assign. Other consents may also need to be obtained, for example, if the landlord has a mortgage, the lender’s consent may be needed. Once the Licence to Assign has been signed, the formal transfer can proceed. Depending on the lease, the final transfer may need to be registered at HM Land Registry.

For a detailed explanation of the lease transfer process, read our article on Transferring/assigning a commercial lease to someone else.

A clause within the lease that enables you to bring your tenancy to an end before the expiry of the contractual term.

• Overage gives you, as a seller, a second bite of the cherry.  As well as receiving the sale proceeds, overage allows you to share in any increase in value in a property that is realised after the property has been sold.
• Overage provisions on land or property can also be referred to as clawback or uplift clauses.
• If certain circumstances occur (at some stage after completion of the sale) the buyer makes an additional payment(s) to the seller for the same piece of land.

Read the full article here.

An option agreement is a legally binding contract that gives a developer the right to purchase land or property from a landowner. Option agreements are often agreed to be within a specific period of time at a certain price.

To read more, click here.

A conditional contract sets out specified conditions in which both parties are bound to from the outset. Formal completion is linked to the satisfaction of the condition.

Therefore, a conditional contract provides the seller protection by preventing the buyer walking away if the condition is satisfied.

To learn more, including the pros and cons of conditional contracts, please read the full article here.

Essentially, a turnover rent is exactly what it sounds like. A tenant pays a percentage of their turnover rather than a fixed monthly or annual fee to their landlord.

A turnover rent is also commonly referred to as a turnover-based rent.

To read more about turnover rents for commercial property, click here.

MEES set minimum energy efficiency standards which must be met for let properties. The regulations do not apply in respect of property sales. They affect both landlords and tenants of proposed, new and existing leases. They apply to residential and commercial properties, however this article focuses on commercial property only.

The minimum standard is a valid Energy Performance Certificate rating of E. Ratings of F and G are below the minimum. Where the property falls below the minimum it is known as a sub-standard property and the MEES regulations apply.

Read more about the minimum energy efficiancy standards here.