Landlords of commercial property beware
I am a lawyer with some 30 years plus experience in dealing with commercial property.
The purpose of this article is to warn landlords of a recent development that I have noticed in relation to commercial leases. Often landlords tell me that their letting agent has drawn up a commercial lease and the landlord has been told that he does not need a solicitor to act for them on the grant of that lease. This seems to be a trend which has increased in recent years. While it is often common for landlords on residential property to use the form of tenancy that is proposed by their letting agent a commercial lease is a completely different proposition.
Let me say at the outset that agents are not legally qualified to draw up a lease and it is something similar to when one approaches a non qualified person to draw up a Will. Yes they may get it right but more often than not they don't and essential clauses that are there to protect the landlord or should be there to protect the landlord are often not included or are included but poorly drafted so that the landlord is prejudiced.
I recently acted for a prospective tenant and I was faced with a lease that had been drawn up by an agent. I was delighted because the lease had so many defects from a landlords perspective that he would have some difficulty in enforcing the terms of the lease against the tenant, particularly deficient was the clauses which related to rent, rent review, prohibition on the tenant’s ability to assign the lease, the repair obligations on the tenant’s part, prohibition on alterations, dealing with service charge and insurance, and the break clause. If anything did go wrong for the landlord it would hit them in the pocket and what is more the value of the investment would be adversely affected by a poorly drawn up lease. The problem is that most landlords would not realise it was defective from a landlord’s perspective until it was too late. Of course the landlord could sue the agent but the agent will have no professional indemnity cover to cover drawing up commercial leases and the landlord could be suing a man of straw with no effective remedy at all.
The lesson is clear, beware of any agent who says they can draw up the lease and do not bother with solicitors. It may cost the landlord a fortune in the long run.
David Leviten partner Clough and Willis