Avoid Costly Mistakes: What to Check Before Signing a Commercial Lease

It has been months of searching for the right property, checking your finances, and negotiating the heads of terms. Now, at long last, you have a lease in front of you, ready to sign. You are excited and ready to proceed. However, before you sign on the dotted line, have you considered the following:

Does the property have a valid Energy Performance Certificate (“EPC”)?
It is a legal requirement that all properties (subject to specific exemptions) have a valid EPC with a rating of E or above. Furthermore, the government plans to increase this minimum requirement to C in 2027 and B in 2030. Check your lease to see who will be responsible for the costs of any works required to improve the energy performance in readiness for these changes.

Does the property have an Asbestos Management Report?
Under the Control of Asbestos Regulations 2012, when you complete your lease, you will become the “dutyholder” and it will be your legal responsibility to have an Asbestos Management Plan in place, as well as to deal with the removal and treatment of any asbestos at the property. Failure to have such a plan could lead to fines of up to £20,000 or six months’ imprisonment.

Has the landlord opted to tax the property with HMRC?
This is separate from VAT registration and means the landlord can charge VAT on the rent. If the option has not been made, the landlord cannot charge VAT.

Have you checked the condition of the property and clarified whether the lease is a full repairing lease or subject to a schedule of condition?
This is crucial, as once you take occupation you will be responsible for the cost and maintenance of keeping the property in good repair. If the lease is full repairing, you could face a substantial dilapidations bill at the end of the term for any disrepair — even if it existed when you took occupation. If there is any damage or disrepair before you take the lease, bring this to the landlord’s attention and request that it be rectified before completion, or have your repairing obligations limited to a schedule of condition.

Have you received recent gas and electrical safety certificates for the property?
Check whether any services exclusively used by the property will fall within your responsibility to repair and maintain under the lease’s repairing obligations.

Here at Churchers Solicitors, we have a dedicated and experienced commercial property team who would be delighted to assist you with your leasehold enquiries — from reviewing and reporting on the terms of the lease, to negotiating and completing it. We can also assist with all due diligence and post-completion requirements, such as reviewing the landlord’s title, ensuring all of the above points are satisfactorily addressed, registering your lease at HM Land Registry, and submitting Stamp Duty Land Tax Returns to HMRC.

Call us on 01329 822 333

Commercial Property Solicitors