The start of new year is the perfect opportunity to review the key dates of your commercial lease to ensure you don't miss anything important.
Rent Reviews
Your lease will specify rent review dates. Generally, this occurs every five years, but this can vary depending on the lease and may happen more or less frequently. The rent will be reviewed based on a pre-determined mechanism, such as to an open market rent rate or with an RPI/CPI increase. Accordingly, keeping a close eye on these dates can allow you to be more prepared for negotiations and potential increases, for example by keeping an eye on the average rents at properties on the market in the surrounding area. Therefore, it is important to monitor the relevant dates for rent reviews, to ensure you are well-prepared for negotiations.
Break Dates
Moreover, your lease may specify certain break dates which provide flexibility in the duration of the lease. Although the lease will have a set duration, it may be possible to terminate the lease prior to this date. This will allow for the early termination of the lease, provided proper notice is given. Therefore, it is important to be aware of the break dates provided in the lease, as well as being familiar with the relevant timescales for providing notice to exercise this break. This will also allow you to be as prepared as possible to meet any specific conditions of exercising this right to end the lease early which may be in the lease, as well as making sure these dates are not missed.
Redecoration
Additionally, your lease will set out specific redecoration provisions. This may require the property is redecorated at certain intervals, for example, annually. The scope of redecoration can vary from just applying a fresh coat of paint to undertaking more extensive renovations. By being aware of these redecoration dates, this will allow you to be aware of whether this is a redecoration year or not, allowing compliance with the lease terms.
Expiry of the lease (tacit relocation)
This year may also be the year your lease is set to expire. It is imperative that you are aware of the expiry date of the lease. In Scotland, commercial leases do not automatically end on the end date specified in the lease. Instead, if no timely notice is served, the lease will continue (most commonly for another year). For most leases, the notice should usually be served 40 clear days before the specified date of expiry in the lease, however the terms of the lease should be checked as a longer period may be necessary. The notice given should be formal to avoid this being done incorrectly and to ensure the lease is properly terminated. Therefore, it is crucial to check the end date of your lease to ensure plenty of notice can be given for terminating this and for appropriate advice to be taken.
At the end of a lease, there are usually provisions requiring the tenant to remove and restore any alterations made. Being aware of the end date of the lease allows for plenty of time to check what will be required and to organise these works or check with the landlord that this is still what is desired.
Alienation
Lastly, a lease may prohibit assignation or sub-letting of the lease in the first three years. This period may now have expired and provide you with new opportunities with the lease.
Overall, as we enter the new year, it is important to review any key upcoming dates to avoid missing any of the important above dates.
If you have any questions or concerns, please do not hesitate to contact Breda Deeley or your usual Brodies contact.
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