Commercial Lease for a Café

Explanatory Notes

Commercial Lease for a Café

This form of commercial lease agreement is intended for use of a short-term lease of a café (i.e. one of less than 7 years’ duration). Assignment and sub-letting is not permitted. It is assumed that the commercial lease will be contracted out of the Landlord and Tenant Act 1954 and that it will be a headlease or, if an underlease, that it complies with the requirements of the headlease. This Commercial Lease for a Café has been drafted so as to comply with the relevant recommendations of the Code of Practice for Commercial Leases (second edition, April 2002).

Included in the café lease agreement is an express tenant’s covenant to observe food hygiene standards. There is also a standard covenant against creating nuisance or annoyance, but the tenant may have to pay particular regard to noise and smell.

Landlord and tenant law is a complex area of law and it is always recommended that you take legal advice before entering into a commercial lease, whether you are a landlord or a tenant.

Section 1: Definitions and Interpretation

Note that:

• Rent is the basic rent only. Insurance costs, rates and utilities’ charges will be in addition to the basic rent.
• The Building is the whole of the land and building owned by the landlord. The Premises is part of the Building which is let to the tenant. The description and extent of the let property will depend on the type of construction of the building. You should consider whether any structural or external areas should be included. The windows and café fascia should be specifically mentioned.

Section 2: Grant

The café lease agreement is granted for a fixed term. No title guarantee is given. The grant is made subject to the matters affecting the landlord’s title at the date of the commercial lease.

The rent together with VAT on it and all other sums due under the commercial lease are all reserved as rent.

Section 3: Rights

This section of the café lease agreement describes the rights granted to the tenant and the rights reserved to the landlord together with other rights to which the commercial lease is subject. Reference is made to the rights and reservations in the transfer under which the landlord holds the freehold of the Premises. Clause 3.3 expressly excludes any rights over any adjoining property (other than any rights which may be specifically granted under Clause 3.2). Clause 3.3 also excludes the provisions of section 62 of the Law of Property Act 1925 in the absence of which the commercial lease would confer on the tenant all easements, rights and advantages enjoyed by the Premises at the date of the commercial lease agreement.

Section 4: Rent and Other Payments

This section of the commercial lease lists payments the tenant must make to include Rent and all outgoings in respect of the Premises to include VAT.

Section 5: Insurance

It is for the landlord to insure the building (other than a plate or window glass) and for the tenant to refund a fair proportion of the premium. 

Section 6: No Assignment, Subletting or Dealings

This section of the commercial lease includes an absolute prohibition on dealings.

Section 7: Repair and Decoration

This is not intended to be a full repairing and insuring lease. There are 4 specific obligations on the tenant:

1. To keep the Premises clean and tidy and to keep the windows clean;
2. To replace broken or damaged glass;
3. To keep all electrical and mechanical appliances serviceable; and
4. To redecorate and replace the floor coverings at the end of the term.

There is then a general repairing obligation on the tenant. On the assumption that the commercial lease is not a full repairing lease, the section includes wording limiting the repairing obligation by reference to a schedule of condition. It may not be worth the time and expense of preparing a schedule of condition for a short-term lease and, from the tenant’s point of view, it would be better to delete the obligation all together.

If the tenant retains structural parts, the tenant may require a repairing obligation on the landlord.

Section 8: Alterations and Signs

This section of the café lease agreement allows the tenant to put up and remove non-structural, demountable café fittings. Re-instatement is required at the end of the term, only if this is reasonable.

Otherwise the tenant may not carry out any alterations including alterations to service media. Section 8 may therefore need to be amended, if needed.

Signage is not allowed to be put up so as to be seen from outside the Building other than an appropriate café fascia and a copy of the café menu.

Section 9: Tenant to Remedy Breaches

The landlord has a right to enter the Premises to carry out repairs if the tenant fails to do so.

Section 10: Use

The Permitted Use is as a café for consumption of food and beverages. If the sale and consumption of alcohol is required, you will need to obtain appropriate licences under the Licensing Act 2003. The description of the specified items should be wide enough to cover the tenant’s proposed business over the term of the commercial lease. Included in this section is a specific obligation on the Tenant to observe food hygiene standards.

Section 11: Legal Obligations

This section of the commercial lease sets out the tenant’s obligations to comply with all lawful requirements in respect of the Premises.

Section 12: Returning the Premises to the Landlord

This section of the commercial lease agreement sets out the tenant’s obligations at the end of the commercial lease to remove all stock, fixtures and fittings.

Section 13: Indemnity

There is a broad obligation on the tenant to indemnify the landlord both for breach of covenant and for the tenant’s acts or omissions. Acts or omissions are not limited to negligent acts or omissions and a tenant will need to check that it has appropriate insurance cover or seek to amend the provisions in this section.

Section 14: Landlord’s Covenant for Quiet Enjoyment

The landlord covenants with the tenant that, so long as the tenant pays the rents reserved by and complies with its obligations in the commercial lease, the tenant shall have quiet enjoyment of the Premises without any lawful interruption by the landlord or any person claiming under the landlord.

Section 15: Condition for Re-entry

The right of re-entry on a breach of covenant by the tenant must be expressly reserved.

Section 16: Liability

Note to include the provisions of 16.2, where the tenant is more than one person.

Section: 17 Notices

This Café Lease Agreement includes a short form notice clause. Notices must be in writing (except in case of emergency or if the commercial lease states otherwise) and writing includes faxes but does not include email.

Section 18: Entire Agreement and Exclusion of Representations

The purpose of an entire agreement clause is to set the limits of contractual obligations and to prevent the party relying on the clause from being liable for representations made before the commercial lease is entered into. 

In this clause, the landlord seeks to exclude liability for pre-contractual (mis)representation. This will only be valid if it is reasonable and the issue of reasonableness will be looked at in the context of each particular case.

Section 19: Miscellaneous

Landlord and Tenant Act 1954

It is assumed that the commercial lease will be excluded from the security of tenure provisions of the Landlord and Tenant Act 1954. Sample forms are enclosed.

Contracts (Rights of Third Parties) Act 1999

The exclusion of the operation of the Contracts (Rights of Third Parties) Act 1999 is excluded, the effect of which might otherwise be to give certain third parties the benefit of provisions in the commercial lease.

Landlord and Tenant (Covenants) Act 1995

It is common practice to include a statement that the commercial lease is a new tenancy for the purposes of the Landlord and Tenant (Covenants) Act 1995 (i.e., one granted after 1 January 1996) so that the status of the commercial lease is clear.

Applicable Law

It is provided that English law will apply to the commercial lease agreement and that it will be subject to the jurisdiction of the English courts.