Model Commercial Lease: Why a Template cannot replace legal advice
While using a Model Commercial Lease template to draft your commercial lease yourself might seem like a great way to save money, the Model Commercial Lease series of templates is not an effective replacement for a commercial lease solicitor. Mistakes, misunderstanding and ambiguity in leases could cost you far more than you would save by not taking legal advice, so it is better to save yourself the trouble and get things right the first time.
What is a Model Commercial Lease?
A Model Commercial Lease is a template which can be used to create leases for commercial property. There are of leases available for all different types of commercial property from shops and restaurants to offices and industrial units and the leases come complete with draft lease terms which are commonly found in commercial leases for that property type. The purpose of the Model Commercial Lease is not to replace the need for a commercial lease solicitor, but to cut out a lot of unnecessary negotiation between landlords and tenants by providing a basic template to start with. Someone untrained in commercial property law will likely struggle to use the template as they are written using legal terminology and in such a way that a layperson is likely to find quite confusing.
Who can use a Model Commercial Lease?
While technically there is no reason why anyone can’t download and alter a model commercial lease themselves, it is strongly advised that you obtain legal advice from an experienced commercial property solicitor instead. Drafting your own commercial lease without legal advice (even with a template) creates a risk of the lease terms not being sufficiently clear which could make them very difficult to enforce. By instructing legal advice, you cut out these risks plus have the benefit of a solicitor who can design your commercial lease with your needs in mind. They may be able to recommend ways to get the most from your commercial lease that you are not aware of yourself and will be able to help you avoid common pitfalls other commercial landlords and tenants fall victim to.
Ensuring amendments are made properly
The biggest downside of using a Model Commercial Lease is that the templates are designed with no specific property in mind. Although most of the lease terms are commonplace, there will inevitably be changes required and the template cannot possibly contain all of the variations of terms that a business owner could need. Even if a clause only needs a minor amendment, it is essential to get the wording of any clause correct otherwise the other party may not be bound by it. No matter how complicated your needs from your lease are, your commercial lease solicitor can ensure that they are covered. They can draft a clause which is unambiguous and, in the event that the landlord or tenant doesn’t adhere to the terms included, that can be enforced in Court.
Implied lease terms – a hidden danger
Another reason why it is so important to instruct legal advice instead of using a Model Commercial Lease template yourself is because of the risk of implied lease terms. Implied lease terms will automatically be present in a lease if the lease does not have a fundamental clause written into it. For example, a competent solicitor would advise you that, without a clause expressly excluding the provisions of the Landlord and Tenant Act 1954, the provisions of this Act will be presumed to apply to the Lease. The Landlord and Tenant Act 1954 provides that the tenant shall have Security of Tenure over the property, which means they will be automatically entitled to renew their lease at the end of the term – so if the lease does not expressly and clearly say that the provisions of the 1954 act are excluded, you could be stuck with the same tenant for a long period of time. The danger of implied lease terms is that they are specifically not written into the lease, so that you wouldn’t know they existed no matter how carefully you looked at your lease. You may have assumed your lease would already include a certain term only to find that it does not and the lease can’t be amended without the landlord or tenant’s agreement.
The need for the Statutory declaration
Another issue that a commercial lease solicitor would be able to advise you on is the issue of the statutory declaration. Even if the lease does expressly exclude the Landlord and Tenant Act 1954, the tenant (and the guarantor if applicable) will need to be served a separate notice informing them of the fact the lease is excluded from this Act and sign a separate Statutory Declaration confirming that they are aware. If this isn’t signed and properly witnessed, the tenant or guarantor can argue that they were not properly made aware that the 1954 Act did not apply to the lease and make a claim against the landlord.
Paying the right amount of Stamp Duty Land Tax
Stamp Duty Land Tax is also payable by the Tenant on commercial leases, not just residential property purchases. If you do not pay the correct amount of Stamp Duty after completion, you could have to pay a penalty and interest on top of what you owe. A commercial lease solicitor can calculate the amount of Stamp Duty Land Tax you can expect to pay upon completion so you can be certain that the right amount is paid in time.
Keeping up to date
Commercial lease solicitors need to stay up to date with developments in the legal sector and will therefore be able to provide up to date advice whenever you instruct. They will also usually be able to inform you of impending updates to the law which are due to be passed to help you make sure your lease takes into account any incoming changes. Free legal resources like the Model Commercial Lease often go a long time without being updated meaning that your lease might not take into account recent legal developments and your lease could end up not working as planned.
The time-consuming process of creating a lease
Another simple reason why instructing a commercial lease solicitor to draft your commercial lease is for the simple reason that an experienced solicitor will be able to produce a personalised commercial lease for a client in a fraction of the time it would take someone without the legal knowledge to do it themselves. Even with all of the free resources available to use, it takes time to research and understand how commercial leases work, plus there will likely be some negotiation between yourself and your landlord or tenant. Our commercial lease solicitors can finalise your commercial lease in as little as four weeks including negotiation with the other side’s solicitor, finalising the lease and ensuring it is properly registered if necessary.
Spotting the warning signs – checking the property’s title
A commercial property solicitor will have the experience and the tools at their disposal to make sure that there is nothing on the property’s title deeds which could pose a problem for an incoming tenant. The property’s title deeds will confirm who owns the freehold of the property and contain information about any covenants or restrictions that might affect the tenant, such as any restrictions on what the property can be used for. If there are any problems that crop up on the property’s title deeds, a commercial property solicitor will also be able to advise you on what can be done to resolve the issue, or warn you if accepting the lease could be a bad idea.
Registering the Lease
Leases that are over 7 years in length will need to be registered with the Land Registry. If you do not register your lease, it will not be considered legally valid. A solicitor will be able to handle registration of the new lease for you and deal with any enquiries the Land Registry has about the application to register on your behalf.
What should a commercial lease include?
A standard commercial lease should at least include the following clauses:
- A Forfeiture Clause:
Forfeiture Clauses give the Landlord the right to repossess the property if the tenant breaches any of the terms of their lease. Without a forfeiture clause, a landlord will only be able to repossess the property if the tenant fails to pay rent and would also have to follow the statutory procedure to repossess the property – which means that if the tenant allowed the property to fall into disrepair or began subletting without permission, the landlord wouldn’t be able to stop them.
- A clause restricting alterations
Without a clause that specifically states which alterations a tenant can or cannot make, tenants are allowed to make any alterations they want as long as they don’t damage neighbouring properties or the environment around it.
- A repair clause:
It is important to set out precisely what the tenant and landlord will each be responsible for in terms of maintenance of the property. Repair clauses can set out what the tenant must do and how often they will be expected to do it – for example, many repair clauses include an obligation for the tenant to repaint the exterior of the property at certain intervals throughout the lease.
- A break clause:
Break clauses allow the landlord or the tenant to end the lease early at certain points throughout the lease by serving notice on the other party. Including a break clause is an excellent idea, especially in longer leases – the landlord doesn’t want to be stuck with a tenant who may not be able to pay their rent, and the tenant doesn’t want to be stuck in a property which isn’t growing their business.
- A lease plan:
Lease plans depict the property and clearly set out which parts of the building are included as part of the lease. They should also include any areas included in the lease that are separate from the main building, such as parking spaces.
- User clauses:
User clauses dictate what the tenant can and cannot use the property for. This is particularly important to make sure the tenant will not use the property in such a way that would break a restriction on the title, which could result in a claim being made against the landlord.
- A contracting-out clause (if applicable)
As mentioned above, contracting-out clauses state that the lease is exempt from the protections of the Landlord and Tenant Act 1954 which would give the tenant security of tenure over the property. Without a clause expressly including this act, a landlord will not be able to stop the tenant from renewing their lease except in certain circumstances, such as if the tenant has not paid the rent. Not only is it important that these clauses are included; it is important they are included properly. The wording needs to be correct to ensure that the landlord can enforce the lease terms in the event of a dispute between the landlord and tenant – which is another reason why it is so important to take legal advice rather than attempt to draft the lease yourself.
Assigning the Goodwill of the Business plus Fixtures and Fittings
If you are a commercial tenant assigning your lease to another tenant, we can also assist you with the sale of your business and the sale of the property’s fixtures and fittings. It is important to create a formal document setting out the details of the sale of business or of fixtures and fittings as otherwise, there will be no record as to what the agreements were which can lead to problems later on. We can help you create a formal document which sets out the terms of the sale of your business called a Deed of Assignment of Goodwill, and a Fixtures and Fittings List which details which items will be included in the sale. There will be additional fees for this work which your commercial lease solicitor will discuss with you.
Why should a tenant instruct a commercial lease solicitor?
The commercial lease is usually drafted by the landlord – or preferably, their solicitors. It will therefore inevitably be weighted in the landlord’s favour, as their solicitor will be responsible for making sure the lease fits the landlord’s needs. They have no obligation to make sure that the lease is fair towards the tenants or to explain to the tenant what the terms of the lease mean for them. By instructing a commercial lease solicitor, you will know exactly what you should expect from a commercial lease and will know exactly what you’re agreeing to when you sign. Your commercial lease solicitor will examine your lease on your behalf thinking only of how it affects you and can negotiate with the landlord’s solicitors on your behalf to make sure the lease adequately suits your needs. With their experience and knowledge, they can help you spot potential problems and, should you decide to go ahead, will also take care of completion and registration of the lease (if applicable) for you.
Expert Advice from Our Commercial Lease Solicitors
From negotiating heads of terms through to completion and ongoing lease management, commercial property transactions often require input from multiple legal specialists. Our commercial property lawyers, commercial property transaction solicitors and commercial leasing specialists regularly advise businesses and investors on property matters throughout England and Wales.
Our experienced commercial lease solicitors act for landlords and tenants in all matters relating to leasing commercial property. From preparing a detailed lease agreement for commercial premises to advising on commercial lease terms and commercial lease rent, we ensure every detail aligns with your business goals. We also handle commercial lease transfers, short-term commercial leases, and assist with the forfeiture of a commercial lease when required. If you’re involved in commercial lease negotiations or need representation in a commercial lease dispute, our team will guide you through the process with clarity and confidence.
Our Offices
Get in touch today and speak to one of our dedicated first-time buyer solicitors. We are here to help you every step of the way. If you need a conveyancing quote, check out our online conveyancing quote calculator.
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Read more:
- Commercial Lease Dispute Solicitors
- Commercial Lease Solicitor
- Forfeiture of a Comemercial Lease
- Commercial Lease Transfer
- Short Term Commercial Lease
