David Hallam and Tom Henry from the Commercial Property Department at Hethertons Solicitors in York and Boroughbridge answer some of the FAQs that they regularly get asked.
Why do I need a Solicitor?
Leasehold property law is complicated. It is very easy to sign up to a Lease without being fully aware of it’s legal effect, so getting the right advice at the outset is vital. At Hethertons we will make sure that you are fully aware of what the Lease means before it is signed. We will re-negotiate any terms that we feel may adversely affect you. Leases contain various rights and obligations which will apply for the whole of the term of the Lease. Once the Lease is entered into it can only be varied by Deed with the consent of both parties. It is therefore vital for both Landlord and Tenant that the terms of the Lease are properly considered and drafted before the Lease starts.
How much will it cost?
At Hethertons we are happy to discuss our costs with you and can tailor our fees to reflect your requirements. We will agree the extent of the work which we are to carry out with you in writing at the outset and what the cost of that work will be. We will not exceed that cost unless specifically agreed by you.
Sometimes the consequences of not obtaining the right advice can be very expensive so it is important to balance the need to obtain the right advice against the cost.
Why do I need a Lease document?
A Lease is a contract between the owner of premises and someone who wishes to use and occupy those premises. It confirms the terms upon which their occupation is to operate and creates certainty for both parties. This means that disputes over the terms of the occupation are much less likely to arise. It is very important that the wording of the Lease fits the circumstances and it is unwise to use ‘off the shelf’ leases that have not been properly considered. At Hethertons we will make sure that the Lease you enter into is the best that can be achieved for you and properly reflects your needs and requirements.
Who is responsible for repairing the Property?
The tenant is usually required in the Lease to keep any parts of the property that the tenant uses exclusively in good repair. Any jointly used parts of the property are usually repaired by the Landlord and the cost is then recovered from the tenants of the building. This can for example include the roof. Many disputes over Leases arise out of the repairing obligations. At Hethertons we will make sure that the repairing covenant in the Lease is correctly drafted and advise you on ways of limiting your liability to maintain the premises.
Who insures the Property?
Normally the Landlord will insure the building and recover the insurance premium from the tenants on a square footage basis. The tenant should insure their own contents. At Hethertons we will make sure that the Landlords insurance obligations are set out in the Lease correctly and that all the normal insured risks are covered.
What is a Guarantee?
A Guarantee is an obligation which requires a third party to pay the rent and other payments due under the Lease if the tenant fails to pay them. Typically this is used where the tenant is a limited company. The Landlord will usually require one of the company directors to personally guarantee the Lease to prevent the limited company being wound up and the Landlord being left with no-one to enforce the Lease against. The Guarantee may not be enforceable unless it is properly drafted, or may impose requirements on the person giving the Guarantee that are unreasonable. At Hethertons we will ensure that any Guarantee is properly drafted and make sure that you are fully aware of it’s legal effect.
I am hoping to buy my shop which I trade from, is it the same as buying a house?
There are similarities but also important differences although if you have bought a house that is a useful starting point.
You must firstly find out who the owner of the freehold is, you may currently pay rent to a managing agent but they will not own the freehold and will therefore not be the seller, it could quite possibly be someone you have never met. Once you have identified the owner a price must be negotiated in the same way as buying a house. It is advisable to take advice from an agent with experience in commercial property. You may well be buying shop with a tenant living upstairs in a flat or perhaps another commercial tenant sharing the building, more below.
Once you have agreed the price it is sensible to make an appointment with your solicitor. They will review the legal information relating to the property and carry out the appropriate searches. It is important amongst other things to check the property has the correct planning permission and there is not going to be any building work around the property that could affect your business. At the same time (if necessary) you will need to sort out your mortgage finance which will also involve your solicitor.
As mentioned above when you buy the property you may also inherit other occupants. This could be a residential tenant living above your shop or another business. You now assume control for the building and will have to work with these other occupiers, people are often unaware they have to deal with the buildings insurance and maintenance of common parts – make sure your solicitor investigates this aspect carefully. You may well be stuck with other occupiers who you are unable to remove from the property and this may affect your future plans. This is certainly an aspect that differs from buying a residential property.
However there are many positive aspects of owning the property. You do not have to pay rent to an agent or have the hassle of trying to contact someone to try and get anything done such as redecoration or replacing/repairing the utilities. There is also no chance of you being evicted or asked to leave by an inconsiderate Landlord. You are master of your own destiny.