Commercial landlords: Five tips to avoid tenancy problems

Renting out commercial property can be risky for a landlord, particularly when leases are granted without seeking advice from a lawyer. Getting it right from the start can help prevent big issues if your tenant is behind on rent, leaves the premises or makes structural changes without your consent. 

Based at WHN’s Blackburn office, commercial property specialist Katie Hall shares her top tips on how to avoid a commercial property nightmare.

1. Research your tenant

Make sure you know about your prospective tenant by carrying out business background checks. Consider asking for references from current or previous landlords or trade creditors. If it is a limited company, check who are the directors and shareholders in advance of drafting the lease.

2. Protect yourself against tenant financial problems

You may wish to take a rent deposit, which the tenant pays on day one and the landlord holds onto.  If money is owed, the deposit sum is then immediately available to the landlord, without the need for costly court proceedings. You could also ask for someone to act as a guarantor for the tenant.

3. Make your basic lease terms clear

Take specialist legal advice early on. Too often agreements are made in advance of gaining an expert view. WHN has advised changes to lease terms in order to protect the client but it’s very difficult to go back and renegotiate on something you have already agreed. Take a surveyor’s advice too to gain perspective on rental levels in the market.

4. Don’t allow the tenant to occupy the property early

It may be tempting to allow a tenant access to the property before the lease has been prepared and signed so that a landlord can start to charge rent. However, this leaves a landlord at risk of the tenant acquiring protection under the Landlord and Tenant Act 1954 which can make it very difficult for a landlord to regain possession of the property.

Allowing early access can also disadvantage a landlord during negotiations as well as causing confusion as to who is responsible for repairs, utilities and insurance before the lease is completed.

5. Think long-term

Are you purely in the business of renting out property or might you need to use the property yourself in the future? If you require the right to remove the tenant once the lease ends, there is a strict procedure to go through before the lease is entered into.

Gaining legal advice is crucial to ensure that this is carried out correctly. Without it you could risk being stuck with the tenant indefinitely. You should also consider lease terms that will make the property more attractive to potential buyers or lenders, should you decide to sell or re-mortgage it in the future.

Katie Hall specialises in commercial property transactions. She deals with all aspects of commercial property law, including property acquisition and sales, commercial remortgages and lease arrangements for commercial buildings, as well as specialising in leasehold enfranchisement claims. If you wish to discuss how to manage your commercial property lease, please contact Katie on 01254 272640 or email [email protected].