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For shops, restaurants and other retail businesses, the premises can be fundamental to commercial success. Location, permitted use, opening hours and the ability to attract and serve customers all matter.
Taylor Rose has a large and highly experienced commercial property team advising retail tenants, landlords and investors across England and Wales. We can advise from heads of terms and initial property checks through lease negotiation and completion, including permitted use, repairs, service charges, guarantees, break rights, assignment and other issues specific to retail premises.
Acting for both landlords and tenants gives us practical experience of where the risks lie and what can realistically be negotiated. For tenants, that includes protecting against the possibility that the location or business does not perform as expected. For landlords, it means protecting the property and investment without making the lease unnecessarily difficult to let or assign.
The lease needs to work if things do not go to plan. Closing a poorly performing site does not end the lease, and rent, repair liabilities and guarantees can continue. Break rights, assignment and other exit options can therefore be as important as the initial rent.
The best opportunity to protect your position is usually before the lease and key commercial terms become fixed.
Our commercial property lawyers can:
Review and negotiate heads of terms – identifying important legal and commercial issues at the outset.
Investigate the property – checking title, rights and restrictions that could affect the proposed business.
Negotiate the permitted use – ensuring the lease allows the business to trade as intended and provides appropriate flexibility.
Advise on occupation costs – including rent reviews, service charges and exposure to major expenditure.
Negotiate repair obligations – including a schedule of condition where appropriate to limit exposure to existing defects.
Protect exit options – negotiating break rights, assignment and subletting provisions.
Advise on guarantees and rent deposits – particularly where a new company or owner-managed business is taking the lease.
Deal with restaurant and hospitality requirements – including property issues affecting extraction, opening hours, deliveries and other essential operational requirements.
Deal with alterations and landlord consent – including licences to alter where required. We have a separate guide dealing with commercial property fit-outs in more detail.
Advise on lease renewal rights – including the Landlord and Tenant Act 1954.
Deal with assignments and business sales – where the lease needs to transfer to a buyer of the business.
Advise on lease exits – including breaks, assignments and negotiated surrenders.
Retail landlords need appropriate protection against tenant default while keeping the premises attractive and commercially lettable.
Important issues include tenant financial strength and security, permitted use, repair and service charges, assignment, alterations and future redevelopment plans.
Restaurants and food businesses may require additional controls over extraction, waste, noise and activities affecting neighbouring occupiers. Mixed-use properties require careful allocation of costs, rights and responsibilities between commercial and residential parts.
If a tenant stops trading and leaves, the lease does not automatically end. A landlord should obtain advice before changing the locks or treating the lease as terminated.
Taylor Rose advises retailers, restaurants, landlords and property investors on new leases, renewals, assignments, landlord consents and lease exits.
Contact our commercial property team for advice before committing to a retail lease or agreeing terms with an incoming tenant.
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Partner
Richard is head of our large and highly experienced commercial property team, with specialist lawyers in many locations, including over 30 specialists in London alone.
We have a mix of employed lawyers and highly experienced Consultants. The lawyers below may not be all lawyers offering this service. You can find Consultants who specialise in this area of law by using the search function below.
A low headline rent does not necessarily mean a good deal.
Service charges, insurance contributions, business rates and repair liabilities can materially increase the cost of occupation. Rent review provisions can also affect longer-term affordability.
Turnover rents require particular care where sales are made through several channels. The lease should establish how online sales, click-and-collect and orders fulfilled through the premises are treated.
Service charges can be particularly significant in shopping centres, retail parks and mixed-use buildings. Tenants should understand what can be recovered and their exposure to major works. Depending on the property and negotiating position, exclusions or a service charge cap may be appropriate.
Repair obligations can create substantial unexpected liabilities, particularly with older high-street premises.
A tenant can potentially take a shop with existing roof, window, drainage or other problems and find that its lease requires it to put those elements into repair.
A survey should therefore be considered before committing to the lease. Where appropriate, a schedule of condition can be negotiated to limit the tenant's repairing obligations.
In multi-occupied or mixed-use buildings, the lease should also clearly divide responsibility between the tenant and landlord.
Restaurants and food businesses can require additional investigation because the property needs to support the proposed operation.
Extraction is a good example. A restaurant may need external ducting across parts of the building outside the leased premises, requiring landlord consent and appropriate property rights.
Planning, licensing and title restrictions can also affect opening hours, deliveries, refuse arrangements and outside seating. If any of these are fundamental to the business model, they should be investigated before the tenant becomes committed to the lease.
This is particularly important where residential flats adjoin or sit above the premises, because extraction, noise, smells, deliveries and operating hours can create additional restrictions.
Mixed commercial and residential buildings create particular property issues.
The lease needs to allocate responsibility appropriately for the roof, structure, common areas, pipes, drains and other shared parts of the building.
Service charges also require care. A shop tenant should not inadvertently assume an unreasonable share of expenditure relating primarily to the residential accommodation.
Access rights can be important too. A landlord may need access through commercial premises to repair parts of the building serving the flats, while the retailer needs protection against unnecessary disruption.
Shopping centre and retail park leases can impose additional obligations covering matters such as trading hours, shopfronts and signage, deliveries, promotions and turnover reporting.
These requirements need to be considered as part of the overall cost and flexibility of the lease rather than dismissed as standard estate provisions.
Competition can also be important. A tenant may seek protection against the landlord letting another unit to a direct competitor. Landlords need to ensure that any exclusivity provision does not unnecessarily restrict future lettings.
Potentially. Depending upon the wording, a repairing obligation can require a tenant to put premises into repair even where the problem existed before the lease started.
A survey and schedule of condition may help manage this risk.
Sometimes. This depends upon the property, lease and negotiating position.
A cap can be particularly relevant where a tenant wants greater certainty over its overall occupation costs.
Potentially. The lease and any licence to alter should establish the reinstatement requirements.
The potential cost should be considered when the works are originally agreed.
Many business tenants have statutory renewal rights under the Landlord and Tenant Act 1954, but the parties can agree to exclude those rights.
This can be particularly important where the location or investment in the premises has substantial value to the business.
A tenant leaving the property does not itself end the lease.
Depending upon the circumstances, the landlord may have rights relating to forfeiture, rent deposits, guarantees and recovery of unpaid sums. Legal advice should be obtained before simply retaking possession.
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