With landlords seeking to maximise the return on their investment and business tenants keen to keep their property costs under control, there is a natural tension between both parties. In most cases a good relationship is established, but things can go awry and there can be plenty of room for a difference of opinion on each party’s rights and obligations.
‘There are problems which we see crop up time and time again between business tenants and their landlords’ says David Hacker, a commercial property solicitor with Thackray Williams, who provides a whistle-stop tour of the most common problem areas where disputes can arise and how a solicitor can help.
Late payment of rent
If a tenant is a limited company and owes rent of £750 or more, then serving a statutory demand for the overdue rent may be the quickest and cheapest solution to put the pressure on the tenant to pay up. Your solicitor can help you draft this. A limited company cannot apply to set a statutory demand aside. If payment is not made within 21 days after service, you could proceed to issue a winding up petition.
Most commercial leases also contain a forfeiture clause allowing a commercial landlord to re-enter commercial premises (subject to certain restrictions) and take physical possession of the premises thus bringing the tenancy to and end. This is the most draconian form of a landlord enforcing its rights but even the threat of it can be effective.
Damage to property
Where a tenant has damaged the property, landlords will need to check the lease to establish what their options are. If the damage is serious, the lease may allow the landlord to terminate the tenancy. If the damage is less serious, then a landlord may have to serve a notice on the tenant requiring them, under any repairing covenant in the lease, to do the necessary repairs.
Causing a nuisance
Some business tenants cause a nuisance in other ways, such as generating complaints about excessive noise, car parking, cooking smells or the creation of fire hazards. Again, the terms of the lease will need checking with advice from your solicitor to establish the options. Where these things mean that you cannot simply bring the lease to an end, then your solicitor can write to your tenant setting out the issue that is causing a nuisance and seeking a written undertaking for it to stop. If this letter does not do the trick, then your solicitor can advise you on court action to compel the tenant to comply.
In addition to rent, tenants will often have to pay charges to a landlord or his agent relating to services that are provided to the office block as a whole for cleaning, insurance, repairs or maintenance. Although most business leases will contain a covenant from the tenant to pay these service charges, the amount of these charges and increases are a frequent source of dispute.
Service charges are not intended to fund improvements to the landlord's property. Where a tenant believes this to be the case, then it could withhold some or all of the payments, although they risk having the lease being forfeited.
Although some landlords do maintenance work themselves, usually this is contracted out to managing agents. Tenants sometimes complain that for the service charges they pay, the office block is still not maintained to an adequate level or that the managing agents are slow to respond to requests from tenants.
With the threats posed by fire, flooding and potential attacks by terrorists, the cost of insuring business premises continues to rise. Usually a lease will require a landlord to insure the premises and to recoup those premiums from a tenant under a service charge.
Business landlords are not obliged to shop around and secure the cheapest cover and a tenant may challenge the insurance where they believe that the landlord has over-insured the premises. This will need an expert and impartial comparison of both the lease and the insurance policy terms.
Notices to tenants
When a landlord wishes to service a notice on a tenant, disputes can arise over whether the correct procedure has been followed.
Nearly all business leases will say something about the service of notices, but the exact wording will vary, and the age of the lease will be reflected in the methods of service which are acceptable – in person, Royal Mail, fax or email.
The service of notice will not be valid unless the intended recipient actually receives the notice.
Of course, some tenants may choose to deal with a notice by simply ignoring it, but they do so at their own peril.
How we can help
Whether you are a landlord or a tenant, if problems arise with a business lease, your first step should be to contact us, and we can review the lease and advise you on your options.