Get it wrong and you can forfeit the ability to exercise the option, a very expensive mistake. So here are our notes and guidelines to help minimise those mistakes.

1 Read your lease. Then……..re-read your lease.                                                This is the arbiter if there is a dispute. So keep to the rules of the lease even if they seem not to follow common sense. It is easier for the other party to dispute your actions if you fail to meet the strict lease requirements.

2 Don’t leave it to the last minute. Plan your moves well in advance and in conjunction with your business plans and get your estates working for the business and not your business working around your lease(s).

3 Who are you issuing the notice to? The landlord, the tenant, the agent or A.N. Other? Again check the lease requirement. If you want to send it to the legal team as well then ok, but check and re-check what the agreement, contract or lease requires, as an absolute minimum.

4 Check and re-check what is to be done and when.

5 Keep a diary of events.

If you are unsure what is to be done, or even if you have a lease break option then contact the team at RPS Lt and let us manage your options for you.

If you think retailing may be for you, perhaps you have a product you want to trial, or just want to make the most  of an opportunity during a special period such as Xmas, Easter or event in your town, then a short term letting could be for you.

These short term occupancies, sometimes known as ‘Meanwhile Leases’ can bring life back to a property or be used for a community benefit and rejuvenate surrounding areas. So, if you think it’s for you and you’ve seen an opportunity here’s some RPS comments for both the landlord & tenant to take note of to protect yourselves;

• A 42 day letting can trigger a further business rates relief period for landlords. So consider this when looking at business rates mitigation plans. Don’t leave this just to your retail units. Look for similar opportunities in your office & industrial properties.
• Tenants, as the landlord is likely to gain from your occupation, push for very low nominal rental.
• Ensure the occupancy does not attract Security of Tenure and falls outside of the LTA 954 Pt 2
• Consider a licence instead of lease
• Make sure you cover issues such as service charge, dilapidations professional fees and insurance premium contributions. We suggest a tenant seeks to confirm all charges are included within the rental charges. See our previous blogs regarding occupancy costs.
• Planning may be an issue so ensure you cover this in your negotiations. Can you use the property for the purpose you want!
• A landlord letting a property is less likely to see the property suffer from vandalism or squatters and is likely to see a reduction in void property costs.
• Landlords, consider promoting and marketing your properties to attract short term occupancy. Make it easier for you to benefit from your property being used whilst we wait for the economy to pick up.

At RPS we see these short term lettings as win – win situation but only if planned and drafted correctly. They have sound business foundations and a shrewd business operator and landlord will see quick benefits from such an occupation.

 Also known as the ‘Purple Book’ it is a guide to best practice in commercial agency applicable to UK commercial agents from marketing (within the envelope of the 1991 Misdescriptions Act) through to money laundering. But it also offers a useful source of reference for clients and other stakeholders.

It refers only to direct property ownership for both occupation and investment, not to

forms of indirect investment.

It is particularly important that those practising in this field should be reminded

of the duties and responsibilities they owe to the clients of their services, as

many key financial decisions may have potentially serious implications.

The aim of this guidance is to ensure that clients can be assured they will receive

a standard quality service from all commercial agents, and to help to improve

standards in the sector by raising public and professional awareness. A further

objective is to encourage agents to aspire to the highest operating standards

through the training and on-going development of their staff.

Both agents and clients should make themselves aware of the key aspects of the guidance that includes chapters on;

Ethics; Duty of care, conflicts of interest, the Bribery Act 2010

Securing instructions; Information to be provided under the Estate Agency Act 1979, when clients must pay.

Disposal / marketing of property; Explanation of auctions & tenders, the Property Misdescriptions Act 1991

Acting for Seller; Information the agent is bound to supply.

Letting a property; Glossary of terms & key terms

Acquisitions; Guidance for agents searching on behalf of clients.

Ending the Instruction; Helping to tie up loose ends

Safety & Security; Data Protection Act

Agency Management; Promoting good practice.

This further supports the advice from RPS Ltd that by appointing RICS chartered Surveyors to act on your behalf is the best way in ensuring that your position is protected by a body that sets guidelines and standards that protect and enhance the  commercial property agency industry.

By using the phrase ‘Without Prejudice’ at the top of all such communication will prevent the use of communications in evidence until a contract is in place to settle the dispute. The documents / communication will be privileged from being produced if legal proceedings are required. But once agreed terms are in place they will be bound, even if headed ‘without prejudice’ unless also headed ‘subject to contract’ (or it is clear that some other type of formalities is also required.

The courts have held, however, that the principle of “Privilege” can protect subsequent and even previous letters in the same chain of correspondence. Strictly speaking, therefore, it is not necessary that every letter be marked “Without Prejudice” if it is clear that the communication is intended to be part of the settlement negotiations. But to be sure it is recommended that you add such headings.

 “Without Prejudice” correspondence remains “Privileged” even after a compromise has been reached and is generally inadmissible in any subsequent litigation on the same subject matter whether between the same or different parties. However, where the negotiations are successful and the “Without Prejudice” correspondence constitutes a binding contract the correspondence may be produced to prove that such a contract has been entered into (if, say, one party does not comply with the terms of the settlement, and the other wishes to enforce it).

Note; Consider using ‘Without Prejudice’ on all communications, this includes emails and text message as well as formal letters and documents.

1. 1.        SHOULD I OBJECT / SUPPORT?

You may have received a letter from your Council notifying you of a nearby development proposal, spotted an application notification posted on the site or in the local paper, or even been asked to join an action group. Maybe your neighbour has let you know he is making a planning application. What should you do?

Clearly, if you are not concerned about the proposal there is no need to do anything. But it is worth giving some momentary thought to the matter. The proposal on its own might not be objectionable but will it set a precedent? If your reaction is one of concern take a moment to stand back and think about your reasoning. The fact you do not like your neighbour is insufficient to justify an objection.

To stand a chance of being taken seriously by the Council any objection or support must be rational, impersonal and directed principally to the planning issues raised by the proposal.

2. THE PROCEDURE

When a planning application is submitted it is processed by the planning department within a set procedure. Applications are usually dealt with within 8 weeks of submission, but delays do occur for a variety of reasons. Once the application is accepted as valid by the Council a series of consultation letters are sent out to a range of Statutory Consultees (such as the Highways Department, Environmental Health, English Heritage etc) which vary depending upon the individual proposal. These consultees are required to respond within 21 days with their comments on the application.

Public participation in planning is increasingly sought by the Government and modern technology will assist further in ensuring you are aware of what is happening in your area. The actual procedure for your Council is established in their Standing Orders.

3. ESTABLISH THE FACTS

All too often objections are submitted which are based on an incorrect understanding of the application. The first step must be to inspect the application and understand it. You may review the application at your Councils’ planning department or increasingly review the application online through the Council’s website. Each application is allocated a discrete planning reference number – it may look something like this x/x/2007/12345/FUL. If you know the number, then ask for the application details by reference to that number. Otherwise make sure you have the address of the property.

You will be allowed to inspect the application forms, plans, drawings and other information submitted by the applicant. You may not be allowed to view the responses from consultees or other objectors, although increasingly these are published online. The planning department will outline the areas of objection and support in their report to the planning committee.

Consider the application carefully. You can usually discuss the application with a Duty Planning Officer so that any technical details can be better appreciated. You can make notes and may also be able to purchase copies of the application (but probably not any plans as these will be copyright).

Review the Local Plan policy. The Council will have copies of their Local Plan available either to view or purchase. This may take a bit of reading but will almost certainly contain policies that have a bearing upon the application. Do they support or deter the proposal? You may wish to refer to relevant policies in your letter of objection / support.

Check the planning history of the property. This may be going a bit far for most domestic applications, but sometimes the property may have been subject to prior refusals/ approvals that will have a bearing upon the matter

5. MAKING YOUR OBJECTION / SUPPORTING STATEMENT

You’ve considered the application, reviewed the options and still wish to make representations. Next step is to write down your concerns / supporting points and send them to the Council Planning Department. There is usually a Case Officer or Area Group allocated to deal with the application, but if you cannot discover the exact person then just send your letter to the Planning Department. Always try and include the Planning Reference Number and location of the property. Again, some authorities now accept online submissions via the planning pages of the Council’s website.

Set out your comments logically and in a straightforward manner. Personal comments about the applicant are rarely helpful and imply the objection is personal rather than based upon the planning issues. Keep it brief. Long or rambling commentary is unhelpful. If you wish to include other information then you can do so. Photographs are often helpful to illustrate to the Council your particular concerns. If there is a particular matter that you believe requires the Planning Officer inspecting personally, from your property, then ask him to make a visit.

You will usually be asked to make your objection within the 21-day consultation period established at the outset of the planning application. However, you can submit objections / supporting statements right up to the moment the application is considered. The later you leave it though the less chance there is of the Council really giving your comments due consideration.

6. MONITOR THE APPLICATION

Larger applications may take some time to determine. It is worthwhile asking your Council if they can keep you informed of progress. Once you are logged as an objector / supporter most Council’s today will notify you of any material alterations. Any significant changes to an application may have to be re-advertised and sent out for further consultation. Check to see how the application will be handled. There is an increasing trend toward the use of Officers Delegated Powers, where the application is determined by the Officers, rather than going to a full planning committee.

7. ATTENDING THE PLANNING COMMITTEE

You are entitled to attend any planning committee meeting to hear the applications being considered by the Council. Committees are usually held on a monthly basis, but may be more frequent depending upon the Council workload. Committee dates are usually posted in the Council Offices and can be checked with the Council’s Committee Clerks Department or the planning department, or online. Increasingly the public is being allowed to speak at committee meetings and each Council adopts their own procedure for this. In most cases you will need to notify the Council in advance of your intention to speak. Check with the Planning Department or Committee Clerks office about the procedure adopted in your particular Council.

The Chairman will invite those who have registered to speak to address the committee from a suitable position in the Council Chamber. Two or three minutes are common time periods allowed for individual public address to the committee and are strictly controlled. Keep your comments simple, keep them to the point and avoid personal jibes. The committee is only interested in the planning merits of your comments and how they relate to the application.

In our experience as a planning consultant the most effective objector is always the cool, calm and collected representative of personal or local opinion, who has done their homework and presents a logical planning case against (or for) the proposal under consideration.

If you do not wish to speak yourself you can arrange for someone to do this on your behalf, but this must be made clear to the committee. If you are representing other people you should ensure you have their permission for you to speak on their behalf. This may be requested by the committee to prove you have other people’s permission. A letter of authority would be useful. Group objections / supporters wishing to say much the same thing are generally encouraged to group their comments together with one or two speakers only, but you may be able to negotiate more time per speech as a result.

SUMMARY

• Investigate the application and associated planning policy
• Consider helpful amendments / modifications
• Consider discussing the application to resolve problems
• Write down and send your concerns to the Council as soon as possible
• Monitor the application
• Attend the committee to hear the decision
• Consider addressing the committee
• Keep all comments to the point, impersonal and related to the planning issues
• Make sure you have other people’s permission to speak on their behalf

Non-Payment of Rent
Where a tenant has failed to pay rent, such a notice is unnecessary. However, the landlord must serve a rent demand upon the tenant unless such a requirement is specifically excluded in the lease. Ie ‘to pay the rent whether demanded or note’. Here the tenant owes and must pay whether the landlord raises and issues a demand and invoice or not.
If a tenant fails to remedy the breach or satisfy a rent demand, the landlord can forfeit the lease.

Methods of Forfeiture
A landlord may forfeit the lease using either Court proceedings or peaceful re-entry. Making an application to the Court can be time-consuming and costly but it does provide the landlord with greater certainty of securing possession.
Peaceful re-entry is an alternative method of forfeiture for the landlord and is more efficient than the Court. Peaceful re-entry may only be used when the premises are empty and providing that the premises are not of mixed use, i.e. where there is no residential element to the premises.

Relief from Forfeiture
A tenant can apply to the Court for relief when a landlord has forfeited the lease. Where the lease has been forfeited for failure to pay rent, the tenant will generally be entitled to automatic relief providing the tenant pays the arrears and the landlord’s costs before a hearing.
Where the landlord has forfeited the lease pursuant to a s146 notice, the tenant can apply to the Court for relief once he has been served with the s146 notice. The Court has a very wide discretion to grant or refuse relief.
All the above issues have key legal aspects associated with them and your specific circumstances will be dependent on your lease terms and RPS always recommends you take professional advice in such circumstances. This information has been prepared by RPS as a general guide and does not constitute advice on any specific matter.

How long a lease will I have to take?
The length of the lease is purely subject to negotiation. For offices, 3 to 10 years is the norm, with 10 to 15 years more prevalent in retail premises. In the case of warehouse and industrial premises, leases of all lengths are negotiated, although longer than 15 years is now rare. Leases tend to become longer when larger accommodation is involved, but leases in excess of 20 years are now quite rare, although some leisure operators will take 35-year leases.

How is the rent calculated?
The landlord will normally quote a rent based upon a rate per square foot (or metre) applied to the floor area of the property. In the case of factories or warehouses the Gross Internal Area ‘GIA’ will be used. This is the area inside the external walls without any deductions. For shops and offices the Net Internal Area will be used whereby non-usable areas e.g. stairs, toilets and some corridors are deducted from the GIA. In the case of shops the Net Area will then be Zoned to enable a comparison between the trading potential of different shaped shops to be made. We produce a separate document explaining retail Zoning in detail.
Will I get a rent free period at the start of the lease?
It is usual for a tenant taking a new lease to be able to negotiate a rent-free period, or perhaps a reduced rent for a time, at the beginning of the lease. This is often stated as being for fitting out purposes but it is no more than an inducement to take the lease and may bear no relation to the actual period fitting out is likely to take.
The customary amount of rent free varies between different market sectors and usually depends upon the length of lease, the rent and the financial status of the tenant. If the financial status of the tenant, the covenant, is strong enough, a capital payment might also be negotiated. Occupiers, though, need to be wary of agreeing to pay a rent above market levels in consideration of a long rent free period or capital sum as this can leave them at a substantial disadvantage if the market deteriorates.
What are rent reviews?
Any lease in excess of 5 years will customarily have a rent review, either at 3 or 5 yearly intervals, that allows the landlord to revise the rent to a market level. Such reviews are invariably upward only so the amount paid will not go down even if rental levels in an area fall. The Government has been putting pressure on the UK property industry to make a change to this practice but it has not had any effect so far and, in reality, few landlords will agree to downward reviews. If the landlord and tenant cannot agree a fair rent, at review, then the amount is decided by arbitration.
What happens if I don’t need the property any more?
Unless the ability to terminate the lease early has been negotiated (a break option) the only option will be to assign the lease or sublet the property. Most leases allow the tenant to either assign or sublet the whole property but never to assign (and not necessarily to sublet) part. Where subletting of part is permitted, there are frequently additional conditions governing the total number of subtenants; which parts may be sublet; or the terms of the subleases that may be granted.
In the case of an assignment, the original tenant will typically be required to provide a  authorised guarantee agreement that the new tenant will honour its obligations.
Can I alter the property to suit my business?
Most leases allow the tenant to carry out alterations as long as they obtain the landlords consent and oblige the landlord to be reasonable about giving consent. It is quite common for this right to be restricted to internal non-structural alterations.
Anything more than minor alterations may require a formal Licence for Alterations to be drawn up by solicitors including the fitting out works at the beginning of the lease. The tenant will usually have to undertake to return the premises to their original condition at the end of the lease, if the landlord requires it.

What other terms will the lease contain?
Landlords and tenants are completely free to agree whatever terms they wish although a clause would not be enforceable if it infringed the legal protection granted to all tenants under the law. Inevitably, landlords try to retain a degree of control by placing restrictions on the use of the premises or to whom it may be assigned or underlet, but if these restrictions are too onerous, they will affect the rent the landlord is likely to receive at rent review or on renewal – so most landlords are reasonably commercial about this.
What happens at the end of the lease?
Leases of business premises longer than a year automatically have security of tenure. At the end of the lease, the tenant has the right to a new lease for up to 15 years on terms similar to the old lease but at market rent. There are certain circumstances in which the landlord can prevent the tenant exercising that right, e.g. if he wishes to redevelop the premises, but otherwise if the landlord and tenant cannot agree a new lease, then a court will grant a new lease on terms it considers are reasonable under the circumstances. It is possible for the landlord and tenant to agree at the outset that the tenant will not have this right to renew. This is called ‘contracting out’ or taking an ‘excluded lease’. It is quite common to do so in the case of small to medium sized office suites in multi-let buildings, but rare in the case of shops or industrial and warehouse premises
When the tenant eventually leaves they will normally have to return the premises to the landlord in good repair and, if the landlord requires, put back to the original specification, i.e. with any alterations reinstated. This liability for repairs, called dilapidations, can be substantial at the end of the term – if the work is not done the landlord can seek damages. If the premises are in a poor condition at the outset, however, it can be limited somewhat by arranging for a Schedule of Condition to be prepared and attached to the lease. The tenant’s obligation is limited to maintaining the premises in no worse a condition than that demonstrated by the schedule.

Here are 7 steps to help you get there……………..

1 Take professional advice. Entering into an agreement for a lease is potentially one of the largest contracts you will enter into and your commitment to meet its obligations, and payments, could run on for years. Instruct a chartered surveyor who is regulated by the RICS and will hold PI insurance.

2 Be aware of the Code for Leasing Business Premises in England & Wales. Compliance is voluntary but many large landlords will be aware of the code. It is a code for good practice.

3 Be aware of the RICS code of practice; Service Charges in Commercial Property. A voluntary code but as guidance note it has greater effect to RICS surveyors.

4 Always have a back-up property. If negotiations for your 1st choice property should stall then you need to be prepared to pull your papers and move on.

5 Be aware of the full costs applicable to the lease and your occupation; Solicitors fees, SDLT, rent deposits and service charges, insurance, utilities charges.

6 Don’t take the word of the agents. If it’s not in the lease then it’s not in the contract!

7 Finally, you only get one chance to negotiate your lease terms, so take advice early. Be clear on what’s on offer and what you’re willing to negotiate on and don’t assume anything.

Visit www.leasingbusinesspremises.co.uk for a copy of the code.

PLEASE NOTE;
A business lease is a legally binding contract and failure to comply with its terms and conditions could lead to court action and financial loss. RPS Ltd recommends that you obtain advice from an RICS regulated practice to obtain professional opinion before entering into such an agreement.

From 1 June 2004 procedures changed for excluding the security offered to business
tenancies by sections 24 to 28 of the Landlord and Tenant Act 1954. It is no longer
necessary to apply to the Court to obtain a Order authorising the agreement reached by
the landlord and tenant to exclude the security of tenure provisions. Instead, the new
procedure to follow involves compliance with the three steps as set out below. Failure
to follow this procedure could see the tenant acquiring the security of tenure provided
by the LTA 1954.
Step 1 – Notice
The landlord must serve on the proposed tenant a notice in a prescribed form
containing a “health warning”. The “health warning” explains to the proposed tenant the
effect of entering into a contracted-out tenancy, the most important point being that the
tenant will have no right to stay in the premises once the lease ends. The notice must
be served before the new tenancy is entered into or the tenant becomes contractually
bound to enter into it. However, the landlord should only serve the notice on the tenant
once the terms of the new lease have been agreed (or the lease is substantially in its final
form) so as to avoid the risk of the notice subsequently being held to be invalid. Whilst
not specifically required, it is good practice to attach a copy of the draft lease to the notice
itself.
Step 2 – Declaration
Once the notice has been served, the proposed tenant must either sign a declaration or
swear a statutory declaration.
• Notice served at least 14 days before the tenancy is granted/tenant becomes
contractually bound:- tenant signs declaration.
• Notice served less than 14 days before the tenancy is granted/tenant becomes
contractually bound:- tenant swears statutory declaration before a solicitor.
Both the declaration and the statutory declaration must be in the prescribed form. Both
declarations confirm that the tenant has received the landlord’s notice containing the
“health warning”, that the tenant has read that notice, and that the tenant accepts the
consequences of entering into a contracted-out tenancy.
Step 3 – Note in lease
The new lease must refer to:
• the service of the landlord’s notice;
• the declaration or statutory declaration made by the tenant; and
• the parties’ agreement to exclude the provisions of sections 24 to 28 of the Act.
It is good practice to store copies of the landlord’s notice and the tenant’s
declaration/statutory declaration with the lease.
More information
RPS Ltd, www.rpsltd.co
This information has been prepared by
RPS Ltd as a general
guide only and does not constitute
advice on any specific matter. RPS Ltd
recommend that you seek professional
advice before taking action. No liability
can be accepted by us for any action
taken or not taken as a result of this
information.