Leasing A Commercial Property

The process of agreeing a commercial property lease typically follows a number of key stages from initial negotiation to lease completion and occupation. Your lease commercial property solicitor will guide you through each step.

• Agree Heads of Terms – Once the right premises have been identified, landlord and tenant must agree heads of terms. Heads of terms are not legally binding but they create a clear framework for the lease to be drafted, avoiding misunderstandings later. The heads of terms will include things like the rent payable, lease term, break options, repair obligations and service charges. 
• Lease Agreement – The next step is for the landlord’s solicitor to draft the lease agreement, basing it on the heads of terms. The tenant’s solicitor will review the agreement and negotiate clauses if necessary. Negotiations may take place around rent reviews, repairs or break options. The landlord’s solicitor will also provide title documents, a property plan and Land Registry details, along with replies to Commercial Property Standard Enquiries (CPSEs), which are a standard set of due diligence questions.
• Due Diligence and Searches – The prospective tenant’s solicitor will conduct property and local authority searches to identify risks and clarify liabilities around environmental factors such as planning and flood risk, and repair risks related to the condition of the property. It may be necessary at this stage to negotiate a schedule of condition, setting out the condition of the property at the start of the lease.
• Lease Negotiations – The negotiation process ensures both tenant and landlord are in agreement about the legal details contained in the lease. For example, the rent review formula, repair obligations, insurance, service charges, break clauses, subletting and security of tenure.
• Financial and Pre-Completion Steps – The tenant pays their deposit and first rent payment.
• Execution and Completion – The lease and any ancillary documents are signed and dated, making the lease legally binding. The tenant will pay completion monies and possession of the property passes to them.
• Post-Completion Steps – If the lease is for more than seven years, the tenant’s solicitor registers the lease at HM Land Registry, the Stamp Duty Land Tax (SDLT) return is filed and, if applicable, tax paid. Copies of the registered lease are returned to both parties.