Landlord and Tenant: Points to Ponder in Commercial Leases

Most standard commercial leases have an interest rate for situations where the tenant is in some sort of default. The rate will very often be 4% which is in practice very often too low to act as an incentive for tenants to pay their rent and other sums on time. You may wish to consider introducing a default interest rate based on the rate of statutory interest as prescribed by the Secretary of State pursuant to the Late Payment of Commercial Debts (Interest) Act 1998. This is currently 8% above the Bank of England base rate.

It is important to familiarise yourself with the insurance requirements in a lease. In a recent case (Green v 180 Archway Road Management Co Ltd) it was held that the Landlord was unable to recover insurance rent from the tenant because the Landlord had failed to insure in the joint names of the Landlord and tenant as required by the lease.

Landlords and agents find themselves unwittingly granting consents without meaning to do so. Assignments are a particular danger. The Courts have held that giving consent ‘Subject to Licence’ can amount to consent. If the Landlord subsequently requests further security it could be deemed to be after consent has already been granted. Ideally, a request for a Licence (particularly for an assignment or underletting) should be put into the hands of your solicitor as early as possible to avoid unwanted consequences.

For information and advice please contact the team at Roger Hannah & Co