Are You Paying Too Much Rent?

Published: 16 July, 2008

For all businesses the leasing of suitable offices is one of the biggest outlays there is. Philip Drazen, Managing Partner of solicitors Fox Hayes, which has a department specifically addressing legislation relating to the nursery industry, answers a few common questions regarding business premises

My landlord has set an unreasonable rent. What can I do to avoid paying it or reducing it?

Your landlord cannot just raise your rent on a whim, but must do so as part of a periodic rent review outlined in your lease. The purpose of a rent review is to bring the rent into line with the market rate. If your landlord raises the rent to an unreasonable rate you are entitled to dispute it.

You should first lodge a written objection with your landlord within a time limit specified by your lease. If you miss the deadline you could be obliged to pay what your landlord demands. You should provide evidence of the rental value of similar commercial properties nearby and point out the discrepancy between this and your landlord's proposed rent.

If you are unable to resolve the matter, you have a number of options: you can agree to pay the increased rent; you can move out of the property, providing there is a break clause in your lease; you can sublet or assign your lease to another tenant, so long as your landlord consent, or you can instruct a solicitor or chartered surveyor to negotiate on your behalf.

Finally if agreement can not be reached your lease may allow for an independent third party to be appointed to mediate. This will usually be a chartered surveyor or independent valuer. The mediator's decision regarding your rent payments will be final and will be legally binding and both you and your landlord.

I have found an ideal warehouse unit for my business. What issues should I look for when I read the lease?

When entering into a lease many tenants are too busy thinking about the rent, the term of the lease and any service charge implications to consider the financial implications once the lease comes to an end.

The lease will often require you as the tenant to keep the property in a good state of repair and condition and to decorate the interior and exterior at certain points during the term of the lease in a colour agreed with the landlord. You may also embark on both structural and non-structural works for which consent from the landlord is needed.

The lease will usually contain a clause stating that at the end of the term, the tenant has to yield up the property in the same state and condition as when the lease was entered into and, if requested by the landlord, any works done by the tenant have to be removed and the property made good. This could prove to be costly to you, in particular if the landlord and yourself cannot agree to the works needed to fulfil the obligations under the lease. Experts will need to be instructed and litigation could ensue. You could also end up having to put the property in a much better state of repair and condition than it was in at the outset.

You should therefore request that a Schedule of Condition be attached to the lease including photographs and commentary on the state of the property at the time the lease was entered into covenanting that the property will be kept in the same state as evidenced by that schedule.

I want to change my shop-front, can I just go ahead without asking anyone's permission?

If you rent the property you must check the alterations provision in your lease. A landlord will often include restrictions on the alterations you may carry out to the property without his or her consent. Consent is usually given by way of formal written licence and the amount of detail you will need to provide to the landlord will usually depend on the nature of those alterations.

Failure to comply with the terms of your lease can prove costly in the long run. Your landlord may insist that the property be returned to its original condition if permission was not obtained.

Even if you do obtain the formal consent of your landlord to carry out alterations to the property, you may also need to obtain planning permission from the local authority. Whether or not planning permission is required will largely depend on the nature of those alterations. Common alterations include the addition of roller security shutters, access ramps and rails, illuminated signs or air conditioning units.

Even if you own the freehold, you may still need to obtain planning permission from the local authority for alterations to the property. In extreme cases, failure to obtain planning permission may require the alterations to be removed.

If you are in doubt as to whether planning permission is needed, contact the local authority for guidance.

I have a lease for a retail shop, can I also use it to run a wholesale business?

Under your current lease a specific permitted use will be allowed. In order to vary this use it will usually be necessary to obtain formal consent from the landlord. You may also need to obtain planning permission from the local authority. Failure to consult with the landlord or the local authority would constitute a breach by the tenant and you could be forced to stop trading whilst the issue is resolved.

Once consent and permission is obtained, a deed varying the lease can be prepared and entered into with the landlord. In such cases the landlord will usually request that you pay their legal costs.

You should note that by expanding the permitted use of the property, the rent may increase more significantly the next time it is reviewed.

Phillip Drazen, Managing Partner

Tel: 0113 209 8945
E mail: philipdrazen@foxhayes.co.uk