If you are a landlord and you are in the midst of agreeing heads of terms with a prospective tenant for a new lease of your commercial property, there are a number of points you should consider at the outset in order that, following the heads of terms being agreed, the transaction can get off to a good start.
Please note the following points relate to the grant of a commercial lease of commercial premises; there are separate considerations to bear in mind when dealing with residential property.
- EPC – it is a legal requirement on the grant of a commercial lease to have a current energy performance certificate (“EPC”) in place for the property. EPCs are required when certain events occur, such as a sale or when a lease is granted. Once an EPC has been commissioned for a property it lasts 10 years or, if earlier, until works are undertaken to the property which would warrant a new EPC being obtained. If a property does not have a current EPC, i.e. if no EPC has ever been obtained for the property, or the EPC previously obtained has expired at the date you grant the lease, a new EPC will need to be put in place. Crucially, once the new EPC has been received the energy rating for the property must be (as at the date this article was prepared) at least E. If the energy rating for the property is F or G, the lowest two ratings for the energy performance of a property, the commercial lease cannot be granted. Within an EPC there are a number of recommendations as to how the energy rating for the property can be improved. If your EPC has an energy rating of F or G, some of the recommendations within the EPC will need to be implemented so that once a further EPC obtained the energy rating is E or higher thereby enabling the new lease to be granted. Please see our briefing note on EPCs.
- Asbestos Survey – where the property has been constructed prior to 1999, an asbestos survey must be commissioned to identify whether any asbestos containing materials are present in the property. Asbestos is an extremely dangerous material if is not carefully managed and the survey will look to confirm whether asbestos is present in the property and, if so, whether it needs to be either removed or managed. Please see our briefing note on Control of Asbestos Regulations 2012.
- Fire Risk Assessment – prospective tenants of a commercial property will often ask for a fire risk assessment for the property. Often landlords will put the onus on a tenant, who actually occupies the property, to arrange a fire risk assessment. However, you can obtain a fire risk assessment if you so wish in order to avoid any potential delays.
- Replies to Commercial Property Standard Enquiries (CPSEs) – when a new lease is granted, the landlord is usually expected to provide replies to a set of standard enquiries. The replies will provide useful information about the property and allow the tenant to gain an understanding of the property which it would not be able to obtain from any other source. When providing replies to the relevant CPSE forms it is a good opportunity to collate documents, such as electrical certificates and planning documents etc, which are referred to within your replies. It would be advisable to liaise with your solicitor as early as possible to provide replies, and copies of any relevant documents and pass these to the tenant promptly once the transaction gets underway.
- Lease Plan – within the lease a plan will be required to identify the area of the property which is being let to the tenant under the lease. We recommend that a Land Registry compliant plan is prepared, even where the lease itself does not need to be registered at the Land Registry, in order to avoid any ambiguity as to the extent of the property to avoid any potential disputes. Please see our briefing note on Land Registry Compliant Plans.
The earlier you can deal with the above points the more quickly you will be able to progress through the transaction and the less likelihood there is that you will suffer avoidable delays .
Gaby Hardwicke is able to assist both landlords and tenants in the granting of commercial leases, but please note that we cannot act for both parties in the same transaction. Please contact Hannah Bambury and Ian Hoare if you have any questions or queries or if you are considering granting, or taking, a lease of commercial premises.
Read what our commercial property clients say about our service: