Project preparation

One of the most important and intimidating items in the process of acquiring or disposing of offices is the lease. This is usually a very lengthy document and it is essential to have a property lawyer check a lease document produced by your landlord or to draw up a lease for you if you are to sub-let your offices.

Your property lawyer is there to make sure that terms that have been agreed by your commercial agent on your behalf are reflected in the legal documentation, and that the lease doesn’t require you do to anything that is unreasonable or that you simply can’t do.

Although most property lawyers would not agree, the basic principles of a lease are relatively simple and they refer to what the landlord and tenant must, can and cannot do. There will be rent and maybe, service charges to be paid to the landlord, and the tenant must look after the building to an agreed standard. The use he may put it to will be defined. In return, the landlord must make available the building for an agreed period of time, and provide whatever services you have agreed for that period. The clear message here is that your commercial agent and your property lawyer will need to work closely together if your interests are going to be met.

Most of the terms used in leases are defined in the glossary of Office IQ. There are some aspects that need a more detailed look:

The lease term
This is the period of time for which the lease operates (this is sometimes as long as 25 years). During that period, it may be possible to end the lease if your lease includes break clauses. Sometimes break clauses are one-way: only you can end it, but others are two-way, where the landlord also has a right to end the lease. If the latter is the case this is the equivalent of a shorter lease for all intents and purposes, so you will have less security, but so will your landlord. A break clause will often be conditional, and you will be required to fulfil these conditions if you wish to break your lease early.

The rent
This of course is the amount payable to the landlord for the term of the lease. Office rents are normally referred to in “pounds per square foot” although the industry standard at the time of writing is changing to metric: “pounds per square metre”. What is not always clear is that this is the annual rent and it must of course be multiplied by the area of offices you are leasing. You must make sure that your commercial agent measures the offices and gives your property lawyer accurate information on the area, since these are notorious for changing frequently during negotiations!

The rent may be reviewed by the landlord at agreed periods. This will allow an increase or, in some cases, a decrease if market conditions have changed since the lease was drawn up, and either you or the landlord now consider the rent to be too high or too low. You will normally be expected to pay your rent in advance, four times a year. You should check your VAT status with regard to rent. It may be that you can claim VAT back, or you may be able to pay it exclusive of VAT, for instance if you are a charity Whatever the case, note that rent is normally quoted exclusive of VAT. This all depends on the type of building and whether the landlord has decided to charge VAT.

Sub-letting and assigning
Your lease may allow you to do either of these. They may be necessary if you need to move out of all or part of your offices during the term of the lease.

Sub-letting is where you act as landlord entering into a new lease with a new tenant. This will need the consent of your landlord. This lease will have its own conditions and it will be quite separate from your own lease with your landlord although the terms are likely to be similar. You will continue to pay rent to your landlord, a

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