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The decision to enter a commercial lease, such as an office or retail space, is a significant step for business owners. You become the new tenant for this property, which is potentially the start of a long-term commitment. The property will become your business premises, so it is crucial that the space serves its purpose and satisfies your commercial needs. If there are issues that may affect this, you need to make yourself aware of these early, before you decide if you sign the new lease. This article will explain the principle of ‘buyer beware’ or ‘caveat emptor’ in a commercial lease in the UK.
What is a Commercial Lease?
When you occupy a property as your commercial premises, the landlord permits you to carry out specific activities on the premises until the lease term ends. In return, you pay your landlord an agreed rent.
A commercial lease agreement governs your commercial lease. This is a legally binding contract containing the lease terms. Lease terms are the rights and obligations you and your landlord must follow.
Principle of ‘Buyer Beware’
As a commercial tenant, you should understand the principle of ‘buyer beware’ or ‘caveat emptor.’ The buyer-beware principle in a commercial lease means that when you accept to take on a commercial lease, such as when you sign the lease agreement, you do so regardless of any issues there may be with the property. Therefore, you effectively accept the good and bad elements of the commercial premises.
The buyer-beware principle applies to you, as a commercial tenant, who wishes to lease a property. The principle also applies to those who purchase property.
What are the Implications?
As stated, the buyer-beware principle means that when you enter a commercial lease, you accept the advantages and disadvantages of the commercial property. Therefore, you must ensure you conduct proper due diligence to uncover any hidden shortcomings. Researching the property allows you to make an informed decision about whether you want to commit to the lease.
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Importance of Research
To ensure you understand all the issues concerning the potential commercial lease you intend to enter, you need to conduct some research. For example, you might ask for permission to conduct surveys and searches on the property. When researching, it is best practice to include the whole property rather than simply your commercial premises, where the latter is only part of the former.
Engaging a solicitor can also be beneficial. A legal expert will be able to carry out the research you will not be familiar with, including the following:
- planning permissions regarding the land and restrictions on development, which can be done through a local authority search;
- whether the property may be on contaminated land, which can be done through an environmental search;
- whether the property has connections to a highway;
- any risk of subsidence where the property is; and
- water connections, which can be done through a drainage and water search.
Thorough research on a commercial space can reveal issues, such as:
- if your potential landlord does have the authority to grant a commercial lease to you;
- adverse rights; and
- beneficial rights such as any rights of way.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
Before you enter a commercial lease, as a commercial tenant, ensure you make yourself aware of any issues with the commercial property. Once you enter the lease, you effectively take the property in the condition it is currently in. This is the ‘buyer beware’ or ‘caveat emptor’ principle. It applies to commercial leases the same way it applies to purchasing a commercial property.
To make yourself aware of potential issues with the property, you can get legal assistance to conduct various searches. If you only become aware of the issues once you enter the lease, you have no recourse to your landlord.
If you need help understanding the buyer beware principle in a commercial lease in the UK, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A commercial lease is where a business owner has occupation of a property for a period of time. As the commercial tenant, in return, they pay rent and must abide by their lease obligations.
The buyer beware principle in a commercial lease is that the tenant leases the property as it is, so accepts any issues with it and has no recourse concerning these later to the landlord.
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