Commercial Landlords : 5 tips to avoid problems

Renting out commercial property can be risky for a landlord, particularly when leases are granted without seeking advice from a lawyer. Getting it right from the start can help prevent big issues if your tenant is behind on rent, leaves the premises or makes structural changes without your consent. Commercial property specialist and partner, David Buskey, shares his top tips on how to avoid a commercial property nightmare.

Research your tenant

Make sure you know about your prospective tenant by carrying out business background checks. Consider asking for references from current or previous landlords or trade creditors. If it is a Limited Company, check who are the directors and shareholders in advance of drafting the lease.

Make your basic lease terms clear

Take specialist legal advice early on. Too often agreements are made in advance of gaining an expert view. We have advised changes to lease terms in order to protect the client but it’s very difficult to go back and renegotiate on something you have already agreed. Take a surveyor’s advice too to gain perspective on rental levels in the market.

Protect yourself against tenant financial problems

Consider the worst case scenario before the lease is finalised.  If the tenant is a Limited Company, check its accounts.  If it doesn’t look strong then ask directors to give personal guarantees to cover the rent and service charges.  An alternative to negotiate is a rent deposit, which the tenant pays on day one and the landlord holds onto.  If money is owed, the deposit sum is then immediately available to the landlord, without the need for costly court proceedings.

Be aware of changes to the law

For centuries landlords have benefited from a very quick and effective method of collecting arrears from tenants by calling the bailiffs.  However, the law is being radically reformed and in the near future the tenant will be entitled to prior written notice in advance of the bailiff’s arrival date. This could lead to tenant’s goods and belongings being moved elsewhere to thwart the process.  All the more reason to ask for guarantees or deposits before the lease begins.

Think long-term

Are you purely in the business of renting out property or might you need to use the property yourself in the future?  If you require the right to remove the tenant once the lease ends, there is a bureaucratic procedure to go through before the lease is entered into.  Gaining legal advice to is crucial to ensure that this is carried out correctly. Without it you could risk being stuck with the tenant indefinitely.

At Woodcocks Haworth and Nuttall our team of highly experienced solicitors have deep, value-adding knowledge of all areas of commercial property law. To contact our expert team click here.