Tony Moore Specialist Commercial Property Solicitor with AMD Solicitors examines the pros and cons of taking or giving occupation of a commercial property, before a lease is finalised.
Vacant properties are expensive for Landlords. Whilst empty they earn money for neither the Landlord nor a Tenant Business. It is not surprising therefore for one party or the other to be ‘champing at the bit’ to have a property occupied.
To complete the legal formalities of granting or assigning a lease will often take weeks, perhaps much longer. Understandably both the landlord and the tenant may become frustrated at the uncertain timescale. So why not just hand over the keys and let the formalities follow?
There are substantial risks for both Landlord and Tenant in allowing occupation before appropriate documents have been signed. For a landlord, there is the danger that the tenant may start on making alterations to the premises and then simply change his mind and walk away, leaving behind an unlettable and expensive mess.
For the Tenant, he may invest large sums in fitting out premises for his business, only for the Landlord to change his mind and refuse to grant the lease. leaving the tenant without premises and out of pocket.
Where a current Tenant wants to assign a lease, he must not allow a new tenant in before the Landlord has consented. Otherwise there will be a breach of the terms of the lease. This might result in the unhappy outcome of the lease being forfeited ie the Landlord taking back the lease and allowing neither the old nor new tenant to have the premises.
Without a written agreement it will not be clear who will be responsible for repairs and outgoings at the property, who is to insure both the building and its contents and how long the lease will last. A Landlord may also unwittingly allow an occupier to obtain full rights of security of tenure under the Landlord and Tenant Act 1954.
Having said this, the commercial reality is that people do want to move in before completion of the paperwork. So what are the options?
It is possible to enter into a written agreement which will provide certainty and a degree of protection for both Landlord and Tenant for the interim period before the final Lease is ready to be completed. This can be by either what is called a ‘tenancy at will’ or a short term licence to occupy. Both a tenancy at will and a licence come with a ‘health warning’ as neither presents a complete solution and carry their own significant risks. As a solicitor, I would usually advise both parties to wait for completion of the legal formalities, and not give possession or enter into occupation of commercial premises without proper advice.
Tony is a member of the Commercial Property Team at AMD Solicitors. The team will be pleased to advise or answer queries . Telephone 0117 9621205 or e-mail tonymoore@amdsolicitors.com or janineharris@amdsolicitors.com.
AMD have offices at Henleaze, Clifton, and Shirehampton.
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