Commercial property – frequently asked questions
The 1954 Act gives business tenants (in most circumstances) an automatic right to renew the tenancy at the end of the term. This “protection” is there to prevent the Landlord from unilaterally removing the Tenant at the end of the Term. However, the Landlord and Tenant can agree that this protection is “contracted out” of the 1954 Act. This means that the Tenant would not have an automatic right to renew at the end of the term. If the Landlord and Tenant agree to contract out, then a set procedure needs to be followed.
By entering into a Lease, you will be assuming a number of obligations which will be owed to the Landlord, which may also include obligations in relation to the repair of the premises. Your solicitor will be able to advise you on these obligations, and our role is to redress the balance between Landlord and Tenant, and to make sure that you do not take on any liabilities which are unfair.
Other than a few exceptions, commercial property is normally VAT exempt. However, you can choose to waive your VAT exemption by applying to the Inland Revenue. In those circumstances, the property will become vatable, and VAT must be paid on top of the purchase price when the property is sold. The rules surrounding VAT and property are complex. Please contact us if you require further advice
Unless you agree with the Landlord otherwise, and unless the Lease already contains a provision which allows you to get out of the Lease early (a break clause) a Tenant cannot otherwise terminate the Lease.
CPSEs are the Commercial Property Standard Enquiries. They are industry standard enquiries that are raised in commercial property transactions. They are detailed and comprehensive, and provide a lot of information in relation to the property that you will be acquiring.
At the end of a Lease term, what happens depends on the type of Lease that you have i.e. whether or not it is a ‘protected tenancy’ (see FAQ relating to ‘protected’ and ‘contracted out’ tenancies). If it is a ‘contracted out’ tenancy, then you must leave and the Landlord can take immediate action against you if you do not do so. If you do not leave, and you continue to pay rent, then a further tenancy is created.
However, if you have a protected tenancy, and the Lease term ends and the Landlord does not serve notice on you to leave, then you will ‘hold over’ after the end of the term under the terms of the old lease. This continuation can only be brought to an end by the Tenant serving three months’ notice, or the Landlord serving between 6 and 12 months notice. This is a complicated area and you should seek contact if you require further advice.