Top Ten Biggest Mistakes Made By Tenants When Leasing a Commercial Property
Working in the commercial property field advising commercial landlords has opened my eyes to some horrific mistakes made by commercial organisations and individuals when taking a lease of commercial property. In my experience the Top Ten biggest mistakes made by Tenants when taking a lease of a commercial property are as follows:
1) Not employing a solicitor who specialises in commercial property. Let Divorce Lawyers deal with divorce. Let a residential specialist deal with residential property. Pay the extra money and get the best advice from a commercial property specialist.
2) Not taking full control and personal responsibility of the lease negotiations and progress. Never leave it entirely to an Agent or Solicitor. But do take their advice and chase them every day for a progress report.
3) Not preparing a schedule of condition and applying for Tenant fit out prior to lease signing. At best this results in duplication of legal fees and landlords costs. At worst the business cannot operate as envisaged if works planned do not receive landlords consent.
4) Not asking a Landlord to undertake repairs/contribute towards Tenant works prior to signing lease. Landlords are often willing to pay for capital expenditure to facilitate a letting. This is an easy win for a Tenant
5) Not understanding dilapidations obligations. Quite straightforward when taking a lease of a new property however many Tenants unknowingly take these obligations on when taking an assignment of a lease or when taking a lease of a second hand property that is in disrepair already.
6) Not understanding potential service charge liabilities and not capping them. When a tenant gets an invoice for his share of major works it could be too late to do anything about it.
7) Providing a personal guarantee to the lease or taking the lease in own name. I have seen in excess of a dozen individuals lose everything including their homes as a result of them signing a lease in their own name and being personally liable following default of a lease term.
8) Contracting out of s24-28 of 1954 Landlord and Tenant Act (UK only). A tenant that spend 000’s of pounds fitting out an office was forced to vacate on expiry of his lease which was only three years long.
9) Accepting key clauses as being Time of the essence. I have witnessed several Tenants miss an option to break a lease. In one case resulting in them remaining liable for another Ten years on a surplus property. The employee responsible for exercising the break was not aware of the specified timetable within the lease for serving a valid notice.
10) Unknowingly taking on environmental liability. Common with property located on industrial estates. The Landlord goes bust leaving the tenant to pick up the cost of environmental clean up even where the mess was caused by a previous occupier!
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