Financial & Legal News

Property Searches For Commercial Property Leases

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As a business expands or indeed starts up new commercial premises become a necessity, but there is a big difference between commercial and residential leases and as it’s one of the biggest overheads a business often has after wages it’s important to get it right.

What is a commercial lease?

It is a right to exclusive possession of the property for a certain period.  It is a legally binding contract and the contractual relationship is between the landlord and the tenant. The lease will also outline the rights and responsibilities of both the landlord and the tenant during the lease period.

Many business owners do not factor in associated cost with leasing such as renovations and alterations, or indeed the need to turn the empty premises into a building suitable to the commercial activities of the leaseholder. It is important that they are not overlooked.

Commercial Leases and Searches

“When securing commercial property leases businesses should always invest in basic property searches,” warned Commercial Property Lawyer Paul McGladdery.

“They may not always consider this aspect as they are not buying the premises, but it’s really a case of due diligence,” said Paul.  “I would always recommend a search is still vitally important for high-value lease agreements as failing to do this could lead to legal disputes, or significant costs to rectify a situation which could have been avoided had searches been carried out.”

Tenants often do not undertake searches as they consider them a landlords’ responsibility and assume that major maintenance obligations belong to the property owner.

This could prove costly in the long run as the onus is on the tenant as employers to provide a safe working environment for any employees at the place of work. This necessitates health and safety risk assessment checks, fire safety compliance, electrical equipment checks, gas safety checks and managing asbestos problems as part of the commercial lease. Even where these are the responsibility of the landlord to provide it does not follow that they will be in place and knowing this prior to commencement of the lease enables a tenant to make an informed decision on proceeding – or not – with the new lease.

Landlord and Tenant Act 1985

Domestic tenants, however, are afforded protection under Section 11 of the Landlord and Tenant Act 1985 and so are not in the same position.

“I would encourage tenants to make searches part of their due diligence when undertaking a commercial lease as it can reveal risks that a business can insure against or event avoid.  Something like potential flooding, which we see all too often affecting businesses, can be mitigated and appropriate insurance undertaken,” added Paul

“Once potential tenants are aware of the risk in not conducting searches on a commercial lease, they are likely to see the value in having them done.”

For advice from our bespoke commercial property team call 0161 785 3500

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.

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