Things to look for in tenancy agreements
Are you agreeing a lease renewal or looking to take on a new lease? Having made your offer for taking on the tenancy of a new property or discussed the renewal of an existing tenancy, there are various point to be wary off.
Typically, if the property is for business use, for example agricultural or commercial, then the agent marketing the property will draw up Heads of Term, which form the basis of the agreement between the landlord and tenant. Commercial leases are drawn up by a solicitor and typically a land agent will draw up an agricultural agreement, such as a Farm Business Tenancy. Whatever the type of agreement, the principles are the same.
The Heads of Term will start with the details of both the parties and their solicitors, if applicable. Check that these are correct, particularly if you need the tenant’s name of the agreement in a company name or a personal name.
Next is the length of term of the agreement and the agreed rent. These will have already been agreed when you made your offer for the property and likewise negotiations for the tenancy renewal will have included such discussions, but make sure that the agreed terms are recorded correctly.
You will also have the rent days and a rent review clause. Are the review periods and basis of review as you expected? Generally, agricultural rent reviews are observed every three years. Rent reviews might be a stepped rent, to market value or increased in line with the retail prices index (RPI).
You will then get more into the nitty-gritty of terms that were perhaps not discussed in the initial verbal conversations, including checking that the user clause for the property is what you need it to be and to ensure that this caters for any future expansion plans. There might also be rights of access, particularly if you are having to access the property over other land that the landlord owns.
Assignment and sub-letting will also be mentioned, and will generally include a bar on such matters, so give this careful consideration if you think you will need these in the future.
Security of tenure provisions, particularly with commercial leases, will likely to contracted out so that the agreement terminates at the end of the term. Also, check for the repairing responsibilities, particularly if it imposes obligations on you as tenant, as well as restrictions on alterations to the property, and how improvements and fixtures are to be dealt with at the end of the tenancy. Check any break clauses and notice to quit provisions in case you do need to terminate the agreement before the fixed terms expires.
Rachel Kirk, Fisher German LLP
