Leasing Commercial Real Estate

As a commercial tenant, you should take advice on your commercial property lease at the start to ensure it is on the right terms for you and your business. In particular, you should consider the payment and repair obligations you are taking on, including dilapidations obligations at the termination of the lease.

Many shops, offices and other commercial land and property are held under leases of 5, 10 or 15 years’ duration or longer. Most of these leases are FRI (full repairing and insuring) leases. This means, as the tenant, that you are responsible for repairing and maintaining the premises throughout the duration of the lease, and for paying all insurance costs incurred by the landlord. In effect, you are responsible for the premises, as well as the rent, rates, utilities and any service charges. With FRI leases, you should treat the transaction as if it were a property purchase, making all of the same due diligence checks.

Our Commercial Real Estate team can negotiate terms of lease on your behalf at the start of the tenancy, revising and agreeing terms as needed and dealing with lease registration and Land and Building Transaction Tax (LBTT) issues. We can also handle any additional agreements your business needs, including licences for works and rent deposit agreements. During the lease we are on hand to help with any minutes of extension or rent review disputes and any problems over bringing the lease to an end.

As a landlord of commercial property, you need the right commercial lease agreements set up for your business, ensuring clear tenant obligations and terms are in place to protect your investment, including notice to quit terms and irritancy clauses as necessary. In Scotland, all leases are negotiated and the lease terms will depend on your commercial plans and property type, for example whether you are dealing with short-term multiple occupancy premises or long-term leaseholds.

At Thorntons, we can advise you on the lease agreements needed and draft terms for you, reviewing and negotiating any tenant challenges.  We can also negotiate any early stage Heads of Terms prior to agreeing the contract.

A Licence to Occupy is a less formal legal arrangement than a lease, giving non-exclusive occupancy of a property for a set period. It allows both landlords and tenants greater flexibility and is often used for high street shops, offices and multi-let premises, more frequently in England than in Scotland.  

We can advise you on the suitability of a Licence to Occupy for your commercial property and draw up arrangements for you. Or if, as a tenant, you are offered a Licence to Occupy arrangement for your tenancy, we can review the terms for you and ensure it can work for your situation.

Both landlord and tenant have obligations under a commercial lease. If these are breached by either side, this may lead to a contract dispute and possibly litigation. Breaches can include issues such as:

• Landlord not undertaking agreed works on the commercial buildings
• Tenant getting into rent arrears – if the lease included an irritancy clause, this could lead to ending of the tenancy
• Tenant going into liquidation – under landlord’s hypothec rights, they may have priority claim on assets

Our team can help with all aspects of real estate and construction disputes, including contract challenges and actioning agreed terms. We offer alternative dispute resolution approaches, such as mediation, as well as supporting you through an adjudication process if wanted or undertaking court action on your behalf.