Commercial Lease for an Office Building

Explanatory Notes

Commercial Lease for an Office Building

This form of Commercial Lease is intended for the letting of a whole building for commercial office purposes. The Commercial Lease Agreement is for use where the length of the term is seven years or longer, which is subject to registration at the Land Registry and which therefore includes the Prescribed Lease Clauses.

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

SECTION 1: LAND REGISTRY CLAUSES

Land Registry Clauses are a set of standard details, which must appear at the beginning of any commercial lease, which is for a period of seven years or more. The prescribed clauses contain the information which the Land Registry needs in order to complete registration of the commercial lease. 

SECTION 2: PRINCIPAL TERMS

This section sets out the principal terms of the Commercial Lease as to include:

• Grant of Commercial Lease - This sets out the basic commercial lease agreement – namely that the landlord will grant the commercial lease under the terms set out in this document.
• Provisions relating to use of the terms Landlord, Tenant and Guarantor in the Commercial Lease.
• Details of the premises.
• The rent; expressed in the Commercial Lease as an annual sum and the date the rent starts from.
• Rent review dates; for example, if there is a 15-year commercial lease, it might be subject to five yearly rent reviews.
• The length of the commercial lease ('Term').
• Permitted use: stated as use for offices within Class B1 of the Town and Country Planning (Use Classes) Order 1987. 
• Break clauses: this is optional depending on whether it has been agreed that the landlord and/or the tenant will have the right to bring the commercial lease to an end early.

SECTION 3: INTERPRETING THE COMMERCIAL LEASE

This section of the Commercial Lease sets out provisions relating to, for instance:

• The meaning of certain words used in this Commercial Lease.
• Reference to adjoining property.
• A jurisdiction clause: stating that English law will apply to this commercial lease.
• A description of the use of the word Conduit in the Commercial Lease.
• Obtaining any relevant consents from the landlord (e.g. to proposed alterations or to assignments/sublettings).
• The exclusion of the operation of the Contracts (Rights of Third Parties) Act 1999; the effect of which might otherwise be to give certain third parties the benefit of provisions in the Commercial Lease.
• That the Commercial Lease is a new tenancy for the purposes of the Landlord and Tenant (Covenants) Act 1995. This means that it is a tenancy granted on or after 1 January 1996 (other than following an agreement entered before that date or an order of a court made before that date).
• The procedure for notices which have to be served in accordance with the terms of the Commercial Lease.

SECTION 4: RIGHTS

This section of the Commercial Lease 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. In the Commercial Lease reference is made to the rights and reservations in the transfer under which the Landlord holds the freehold of the Premises. Clause 4.5 of the Commercial Lease expressly excludes rights any rights over any adjoining property (other than any rights which may be specifically granted under 4.2). 4.5 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.

SECTION 5:  RENT, INTEREST 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 6: RENT REVIEW

This section of the Commercial Lease deals with the procedure for agreeing a new rent and the possible appointment of an expert, if there is disagreement.

SECTION 7: REPAIR AND DECORATION

This section of the Commercial Lease sets out the Tenant's obligations to keep the Premises to a high standard of condition including the structural parts of the Premises (except repair or damage covered by an insured risk). The Commercial Lease also sets out such matters as the obligation of the Tenant to replace landlord's fixtures and fittings which are beyond repair and to replace damaged or broken windows. The Commercial Lease sets out the Tenant's decorating obligations: to decorate the exterior in every third year of the Term and the interior in every fifth year of the Term.

SECTION 8: ALTERATIONS

This section of the Commercial Lease sets out that the Tenant must not make any structural internal or external alterations or additions to the Premises. The Commercial Lease Agreement requires the Tenant to obtain the Landlord's consent in respect of all other alterations. The Commercial Lease also sets out the procedure for obtaining the Landlord's consent to those alterations. A Pro Forma in respect of the application for consent is attached to the Commercial Lease.

SECTION 9: USING THE PREMISES

Section 9.1 of the Commercial Lease sets out the right of the Tenant to quiet enjoyment of the Premises as long as the Tenant is paying the rent and complying with its other obligations under the Commercial Lease. Section 9.2 of the Commercial Lease sets out that the Premises may only be used for the use for which they are let. Section 9.3 of the Commercial Lease lists restrictions on the Tenant's use of the Premises.

SECTION 10: SIGNAGE

This section of the Commercial Lease Agreement deals with the signs which the Tenant may and may not affix to the Premises.

SECTION 11: LEGAL OBLIGATIONS

This section of the Commercial Lease Agreement sets out the Tenant's obligations to comply with all lawful requirements in respect of the Premises and to comply with all relevant codes of practice in relation to the way the Premises are used.

SECTION 12: PLANNING

This section of the Commercial Lease relates to the Tenant's obligation to comply with all planning obligations in relation to the Premises and the procedure for making a planning application and implementing it.

SECTION 13: PROTECTING THE LANDLORD'S INTEREST

Section 13.1 of the Commercial Lease Agreement obliges the Tenant to give notice to the Landlord of any defect in the Premises or matter in respect of which the Landlord may have a duty of care under the Commercial Lease. Section 13.2 of the Commercial Lease prohibits the Tenant from obstructing any window or right to light which the Premises has and requires the Tenant not to permit any person to acquire rights over the Premises. Section 13.3 of the Commercial Lease Agreement sets out the terms of the indemnity which the Tenant must provide to the Landlord in respect of the use, or condition, for example, of the Premises). Sections 13.4 to 13.6 of the Commercial Lease deal with liability, costs and the exclusion of the right for the Tenant to claim compensation from the Landlord on vacating the Premises.

SECTION 14: LETTING OTHERS USE THE PREMISES

Section 14.1 deals with general restrictions to which the Commercial Lease is subject. Section 14.2 of the Commercial Lease Agreement allows members of the same group as the Tenant to share occupation of the Premises. Section 14.3 of the Commercial Lease sets out the restrictions on the Tenant mortgaging or charging the Commercial Lease. Section 14.4 of the Commercial Lease Agreement deals with notice provisions on a mortgage, or assignment, for example, of the Commercial Lease and the fee to be paid to the Landlord in that respect. Section 14.5 of the Commercial Lease sets out that an assignment, charge or other disposition is to be effective on completion of the relevant transaction and not when it has been registered at the Land Registry.

SECTION 15: ASSIGNMENT AND SUBLETTING

This section of the Commercial Lease Agreement prohibits assignment and subletting of part of the Premises and sets out the conditions the Landlord may impose to an assignment or subletting of the whole of the Premises.

SECTION 16: INSURANCE AND FIRE PRECAUTIONS

Section 16.1 of the Commercial Lease Agreement defines what the insured risks cover. Section 16.2 of the Commercial Lease sets out the Landlord's obligations in relation to insurance of the Premises. Section 16.3 to 16.5 of the Commercial Lease Agreement relate to further insurance obligations and section 16.6 of the Commercial Lease sets out what costs are included in the insurance charge and section 16.7 lists what the Tenant's insurance obligations are. Sections 16.8 and 16.9 of the Commercial Lease Agreement set out what happens in the event of the Premises not being fit for use because of loss or damage caused by an insured risk.

SECTION 17: THE END OF THE COMMERCIAL LEASE

Section 17.1 of the Commercial Lease Agreement sets out (1) the right of the Landlord to affix notices for reletting the Premises during the six-month period before the end of the Commercial Lease and (2) the Tenant's obligation at the end of the Commercial Lease to remove all the tenant's fixtures and fittings and to hand back the Premises to the Landlord with all keys and landlord's fixtures and fittings in accordance with the Tenant's obligations under the Commercial Lease. Section 17.2 of the Commercial Lease Agreement sets out the Landlord's rights in relation to forfeiture of the Commercial Lease.

SECTION 18: GUARANTEE

This section of the Commercial Lease applies where there is a guarantor either as a party to the Commercial Lease or following an assignment.  The Commercial Lease Agreement sets out the obligations and liability of the guarantor during both the currency of the Commercial Lease and in the event of a disclaimer.