A key consideration for a tenant taking a commercial lease of offices or, in some cases retail, will often be whether it has a right to use car parking spaces within the landlord's property. How a landlord documents these rights under Scottish leases can impact both its ongoing management of the property as well as any future redevelopment plans. Here, we explore some of the key landlord considerations when agreeing terms with a tenant for use of such spaces.
Exclusive right?
Prior to entering into a lease, the parties should establish whether any parking spaces should be demised:
- as part of the leased premises;
- as part of the common parts but with an exclusive right of use by the tenant of designated spaces (by way of rights granted either within the lease or a separate car parking licence); or
- for general use by all tenants (and, if applicable, customers) on a 'first come, first served' basis.
How the car park and its spaces are categorised will often be determined by the property itself. An underground car park in a busy office block will likely have limited space available for parking in comparison to a retail park or shopping centre and spaces will therefore be at a premium. A tenant will likely seek an express right to use designated spaces (often by reference to a car parking plan) for the duration of the lease term.
Rent?
Another key consideration is the rent or premiums paid in exchange for parking spaces exclusively used by a tenant. In multi-occupancy buildings with limited car parking space, it is typical for a landlord to charge an additional rent calculated per car parking space.
Differentiating between the premises rent and the car park rent can be helpful – particularly when dealing with any future lease variations or rent reviews which may or may not apply to those spaces. The landlord should also consider whether it wishes to reserve the right to review the car parking rent on a periodic basis – whether annually or perhaps in conjunction with the rent reviews under the lease.
Repairs?
Where a parking space forms part of the tenant's lease demise, the tenant will also take on a repairing obligation and will be asked to maintain, renew and replace etc the parking space as applicable during the lease term. Such an arrangement makes sense where the tenant is exclusively demised the spaces but can be unsatisfactory for multi-occupancy buildings where tenants share a car park. With multi-occupancy buildings, a landlord will likely want to retain control of the repair and maintenance of the car park and recover the costs from the tenants via the service charge. In that scenario, it is prudent to grant the tenant the right to use car park spaces, rather than include them in the lease demise (so option 2 above).
On the other hand, if the tenant has only a general right to park within the common parts, it is likely that the landlord will not charge an additional rent or premium but will instead seek to recover any maintenance costs for the same as part of the landlord's service charge (similar to with a multi-occupancy building). In that case, all tenants will likely be responsible for a fair and reasonable proportion of such maintenance costs in line with the service charge provisions in their leases.
Relocation or variation of car parking spaces
Even where the tenant has been granted the exclusive right to use a parking space, a prudent landlord should consider whether it might have any future requirement to relocate a tenant's spaces or, indeed, reduce its allocation. Such considerations might arise during future lease negotiations with a new tenant or from a desire to reconfigure the car parking area - for example to install bike racks, EV charging points or showers.
'Lift and shift' provisions are commonplace in leases but tenants often focus on those terms to ensure that any new spaces are no less suitable than their current ones. Issues often arise where a landlord looks to replace two single spaces with a tandem space or seeks to replace an underground car parking space with one outside the building.
Regardless of whether the right to use car parking spaces is exclusive or general, a landlord should also ensure it has the ability under the leases to vary or reduce the common parts as required. That is market standard and a well-advised tenant will likely be prepared to accept such a scenario, so long as it does not materially prejudice the tenant's enjoyment of the premises and the common parts as permitted by the lease.
For retail parks and shopping centres, it can also be common for tenants to insist that a landlord maintains a minimum number of spaces at all times. That is generally aimed at customer car parking, to maximise potential customer numbers and footfall. This restriction can affect the viability of a landlord's future redevelopment plans and should always be borne in mind when agreeing such provisions with a new tenant.
Key takeaways
A landlord should consider how a tenant's right to use of car parking spaces are negotiated and drafted in Scottish commercial leases, having regard to the individual arrangements at the property in terms of exclusivity, rent, repairs and relocation. It is important that the landlord notes both its responsibilities and its restrictions in respect of these spaces, and to consider the impact that those restrictions might have on future redevelopment or future lettings.
Contributors
Solicitor
Senior Associate
