Commercial Leases: landlord & tenant

16 Jan Commercial Leases: landlord & tenant

Commercial leases – In the next few weeks we will be looking at what a contract is between a landlord & tenant, leases to third parties and what a lease contract must contain.

Commercial lease

Lease Format

A lease is a contract between a landlord and a tenant. It is enforceable by the civil courts. The person granting the lease (landlord) must have an interest in the land at least as good as the lease granted to the tenant.

Underleases and sub-underleases can be granted to third parties; there is no limit to the number of subsidiary leases that can be granted.

It is important to distinguish between leases, which confer a right of exclusive possession of a property, and licences, which confer no more than a permission to occupy a property.

As a generalisation, if exclusive possession of a property is granted by an agreement, it is a lease. It is possible for a lease to have been granted without any formal agreement. Where exclusive possession is obtained the informal lease will have the benefit of protection under the Landlord and Tenant Act 1954.

If a lease is granted for a period longer than three years it must be by deed. Although short leases can be created without a deed, any later assignment of that lease must be by deed.

Lease Contract

Although the relationship of landlord and tenant will normally be created by a formally drafted lease, it can also arise by parties entering into an agreement for a lease. This is merely a contract between the two parties that they will enter into a formal lease at a future time.

A contract for the sale or other disposition of land must:

  • be in writing
  • incorporate all express terms
  • be signed by, or on behalf of, both parties.

As a general rule, a failure to comply with these formalities will prevent any contract arising. This approach should minimise disputes and provide reliable and incontrovertible evidence of the existence and terms of a transaction.

Any discussion of the arrangements should be marked up as “subject to contract” to ensure negotiations are undertaken without inadvertently creating a binding oral contact.

Contributor: James Page MRICS

Next week….. we will be looking at what a lease should include

 

 

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