Commercial Property Law

If you own freehold property, you own the building and the land that it is located on for as long as you want.

If you own leasehold property, you only have a right to occupy the building or the land for a set period and usually at an annual rent.

A break clause is a clause that allows either a landlord or tenant, or both, to terminate the lease early and prior to its end date, usually on certain terms. It is more common to see a tenant only break clause in a lease than it is to see a landlord or mutual break clause in a lease.

Yes if your lease has a break clause or if a surrender of the lease is agreed. Provided the terms of a break clause are met, a lease will end on the break date referred to in the lease. A surrender requires the agreement of the other party and usually, there is no obligation for the other party to agree – a surrender can therefore become a commercial negotiation.

There are a number of variable factors that can affect the time it may take to complete a sale or purchase (or new lease) of a commercial property. These variables can include the time it takes to arrange bank lending and obtain a suitable lending offer, the time it may take to carry out searches and surveys and the complexity of the transaction. As a guide however, the process can take between 4 – 16 weeks.

Leases can contain a service charge. This is a charge payable by the tenant to the landlord towards the costs and expenses incurred by the landlord in providing services. These services can include for example the costs of cleaning and maintaining communal areas. Service charges are more applicable to leases of units in shopping centres or leases of units on business parks and industrial estates.

The service charge can be set as a percentage of the landlord’s annual costs or, be a fair proportion of those costs. Service charges are typically paid on an estimated basis by installments with overpayments being credited to the following service charge year and shortfalls being payable by a tenant when demanded by the landlord – this is typically after the landlord has produced a final account for the service charge accounting period.

SDLT (and Welsh Land Transaction Tax, WLTT) rates for non-residential property are lower than those for residential property.

This means that SDLT/WLTT on purchase prices and lease rents for commercial property can be lower.

For a new lease, the rent is agreed in advance by negotiation between landlord and tenant. They can also agree fixed rent increases that apply for the duration of the lease – this is known as a stepped rent.

It is more common to see future rents determined by a rent review that typically involves surveyors for the landlord and tenant negotiating the market rent for the premises – this is known as an open market rent review.

Rent reviews can happen periodically (e.g. every five years). Rent reviews can also be based on the rate of inflation over the review period (sometimes with a cap and collar) or, the turnover of the tenant’s business.  

Yes subject to obtaining any necessary planning permission for the change of use, and landlord consent where the property is leasehold.

The fees and disbursements can vary greatly depending on the value of the property, whether the property is vacant or occupied by tenants and the complexity of the deal. Most firms will provide an estimate of the fees they believe will be payable and others may offer to charge a fixed fee.

A planning permission is consent from the local authority permitting the construction of a property and/or its intended use. Planning permissions should be checked in case they contain conditions that are either unworkable for a buyer and/or unsuitable for the proposed business activity.

Solicitors will carry out various checks when acting for a buyer or new tenant of a commercial property. These checks will include searches of the local authority, environmental searches, highway searches, and drainage searches.

They will also check the land registry documents (deeds) for the property and raise enquiries with the seller/landlord to address any concerns or issues.

Buyers and tenants can also carry out their own checks and these can include for example, surveys, inspections and checks of planning and building regulations records with the local authority.