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A commercial lease will contain a repairing obligation which sets out the extent of a tenant’s obligations to maintain and repair the leased subjects. The tenant is generally obliged to return the property in a “good and tenantable condition”. Importantly, this obligation may require a tenant to put the property into a better condition than at the start of the lease (if the property was not in a “good and tenantable condition” at that time.
A tenant who fails to meet these repairing obligations may find that she or he is presented with a bill at the end of the lease for “dilapidations” being the landlord’s estimate of the cost to bring the property up to the required standard.
The potential for dilapidations at the end of the lease is, therefore, a very important consideration when negotiating a new lease as a tenant should, along with the obvious outlays (rent, rates, utility bills, service charges, fit out costs etc.) be budgeting for a potential dilapidations liability at the end of the lease. Getting the drafting of a repairing and dilapidations clause right from the outset is essential so that the tenant can make an informed estimate of their liability during and at the end of the lease. This is a complicated exercise and a number of factors have to be taken into account:
- The age, size and character of the property
- The length of the lease
- Is the tenant taking on a lease part of the way through?
- Is there a Photographic Schedule of Condition attached to the lease to limit the tenant’s repairing obligation to keeping the premises in the same condition as shown in that Schedule?
- The extent of the repairing obligation. Does it cover repairs to the roof for example? Does the tenant have to redecorate at the end of the lease? Is the tenant responsible for historic, or latent & inherent defects?
- Has the tenant’s fit out to be removed at the end of the lease?
A lease usually allows a landlord to serve what is known as a Schedule of Dilapidations detailing repairs needed to the property at any time during the lease and at the end of the lease. The Schedule especially at the end of the lease is usually prepared by a surveyor.
Where dilapidations exist, a commercial lease normally provides one of three options (usually at the discretion of the landlord):
- The tenant can complete the works at their own expense and if they fail to do so then the landlord can complete them at the tenant’s expense;
- The landlord can complete the works at the tenant’s expense; and
- The tenant can pay to the landlord a sum equivalent to the cost of putting the property into the condition it should have been in had the tenant complied with their repairing obligations.
Whilst this area of law is complicated and ever changing, issues at the end of the lease can be dealt with by a little thought and consideration at the start of the lease. It cannot be stressed enough that getting the repairing and dilapidations clause right from the very beginning is essentially important to prevent the tenant having a nasty shock at the end of the lease. This in conjunction with a building survey should ensure that a tenant is aware of what might await her or him come the end of the lease.
Our Commercial Property and Property Litigation experts are here to provide information and advice. Please find out more at http://www.mitchells-roberton.co.uk
Ross Leatham, a Partner in our Commercial Property Department explains what an option agreement is and why the parties involved in a land purchase transaction may want one.
An option agreement is an agreement between a landowner and a potential developer of the landowner’s property. Mostly the prospective purchaser will pay an agreed price to the landowner and in exchange secures a first option to purchase the property within a certain period of time or as a result of a trigger event for example planning permission being granted for the development.
The option agreement provides the developer with some level of protection as it prevents the landowner from selling the property to someone else whilst the potential purchaser is exploring the feasibility of the project thus reducing risk and cost to the developer. Also the purchaser may be able to agree the purchase price from the very outset bringing some certainty regarding costs.
From the seller’s point of view with the property market having its ups and downs over the past number of years an option agreement is a start to a probable deal being done although it does not guarantee a sale and if the developer does not obtain planning permission and pulls out the purchase would not go ahead.
Often something called an overage agreement is negotiated alongside the option agreement. Land will have a greater market value once it has been built upon and an overage agreement will mean the seller would be able to obtain additional payment after completion of the development based on the increase of value of the land.
Option agreements and overage agreements can be beneficial to both the seller and purchaser but there are of course potential pitfalls.
Should you require advice please do not hesitate to contact me by email firstname.lastname@example.org or by phoning 0141 552 3422
The Scottish Family Business Association exists to support, nurture and help develop the full potential of all our Scottish family businesses. Research, expertise and experience from across the globe show that by adopting specific best practices family businesses can overcome inherent challenges and flourish both as businesses and as families.
Although it is not always recognised family businesses already dominate the Scottish economy, accounting for 69% of all businesses in Scotland and create around 45% of the GDP of our country. Yet despite these facts 57% of family firms have no defined plans for succession and most conflicts in family firms arise from family issues such as succession or family relationships. Indeed most family businesses fail for family rather than business reasons. Only 33% of family businesses survive into the second generation with only 9% surviving into the third generation.
So if failure of family firms is predominately due to family reasons then concerns about succession planning, Wills , Powers of Attorney and Pre-nuptial and Co-habitation Agreements can hold equal sway with the sustained success of a family business as any application of commercial law.
There are three matters to consider.
The first is succession planning. . If someone dies without a Will in Scotland their estate is administered according to the law of intestacy which means that rather than the business passing in a planned way from one sibling or generation to another, the future of the business will be decided by the law which in some cases may lead to very young children or distant relatives inheriting control of the family business.
Secondly to have a Power of Attorney is very important. If a business owner or partner cannot work as a result of serious illness or accident then a Power of Attorney will help ensure that the business can carry on as usual. In fact a Power of Attorney can be pivotal to the continuity of the family business and it should be noted are also appropriate for even the youngest and fittest of business owners.
Lastly in family firms decisions around corporate structure, share issue and personnel are often based on commercial or tax reasons and it is easy to overlook the consequences of relationship breakdowns for the business. Pre-nuptial contracts and cohabitation agreements can ring fence a family business from being included in divorce or separation settlements therefore safeguarding the future of the business.
Why leave your family firm exposed if certain events or misfortunes occur. Far better to plan the future of your business and have a Will, Power of Attorney or Prenuptial or Cohabitation Agreement in place. If I can help please contact me email@example.com or by phone 0141 552 3422
The Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 came into effect on 1 September 2016 making it the responsibility of owners of commercial property to improve the energy efficiency of their buildings on either a sale or the grant of a lease to a new tenant.
The owner of a property which is affected is required to provide any prospective purchaser or tenant with an action plan free of charge. The action plan will be prepared by an adviser as defined in section 63 of the Climate Change (Scotland) Act 2009 who undertakes the assessment of the energy performance of the building using the data from the Energy Performance Certificate.
The action plan should set out any identifiable ways to reduce energy consumption and greenhouse gas emissions from the building and set out energy improvement aims. The Regulations point to certain potential improvement measures namely:
- Installing draught stripping to doors and windows
- Upgrading heating controls
- Upgrading lighting controls
- Upgrading low energy lighting
- Installing an insulation jacket to a hot water tank
- Installation of insulation in an accessible roof space
- Replacement of a boiler
These improvement measures only need to be carried out if the energy savings over a 7 year period are more than the cost of the works. These works need to be carried out within 3.5 years from the date of issue of the action plan.
Alternatively an owner can make arrangements to measure, report and display operational ratings of the building annually. If an owner chooses this route they must obtain and exhibit a Display Energy Certificate (DEC) in a prominent place in the building and renew it every year.
The Regulations apply to existing non-domestic buildings with a floor area of over 1000 square metres and also units within non domestic buildings that are designed or altered to be used separately with a floor area of over 1000 square metres. There are a few exemptions, however, for example properties that have been improved under the Green Deal, temporary buildings and workshops, buildings that comply with the 2002 Building Standard and non-residential agricultural buildings with low energy demand. No action plan is needed for the renewal of a lease to the same tenant or where the lease is for less than 16 weeks or where the sale or lease takes place before construction has been completed.
The action plan, DEC and the document of confirmation of improvement must all be registered in the Scottish EPC Register. The Local Authority can fine an owner £1000 for failure to follow the regulations.
If you are a commercial landlord and need advice on these new regulations please contact Ross Leatham on 0141 552 3422 or by email firstname.lastname@example.org
Digital framework is crucially important to UK citizens and the Government is seeking to propose new legislation to facilitate wide reaching coverage, improved connectedness and speedier services.
What many people do not know is that at the moment the vast telecoms network is governed by an Electronic Communications Code enacted in 1984. Given the fact that the first handheld cellphone was sold in the USA on 13 March 1984, apparently weighing 28 ounces and nicknamed “The Brick” it is clear that the existing code has been long outstripped by technology itself.
In the Queen’s speech delivered on 18 May 2016 the Government’s intentions in this regard were set out. The Queen states:
“Measures will be brought forward to create the right for every household to access high speed broadband. Legislation will be introduced to improve Britain’s competitiveness and make the United Kingdom a world leader in the digital economy.”
The Code is in desperate need of reform due to its being outdated, complex and difficult to apply. It was famously described judicially as “one of the least coherent and thought-through pieces of legislation on the statue book.” The real problem for landlords in the past has been in recovering land from an operator and the resolution of disputes between operators and the owners of the various sites on which their telecoms equipment is placed.
The Government has now published a proposed amendment to the current Infrastructure Bill, recommending the incorporation of an entirely new Electronic Communications Code. This new Code is a complete re-write of the existing code with the aim that the new code will be clear in both its drafting and application.
The key provisions under the new code fall under the following headings. :
- Conferral of code rights and their exercise
- Sharing upgrading and assignment of code rights
- Termination of agreements
- Removal of apparatus
- Compensation under the code.
- Dispute resolution
- Code of practice/standard terms
- Impact on existing agreements.
The suggestions for a new Electronic Communications Code reveal that the Government acknowledges the competing interests of land owners and the general public; the interest of the land owners specifically relating to the value of their property investments and the interest of the general public being the desire to access a state of the art electronic communications service. The new emphasis is in favour of provisions of services and is likely to cause significant concern within the commercial property sector.
If you wish to discuss any issues in relation to the proposed amendments please contact Ross Leatham on 0141 552 3422 or by email on email@example.com
Tenants under certain long leases in Scotland as from 28th November 2015 automatically became the outright owners of the property as a result of key provisions of the Long Leases (Scotland) Act 2012.
In contrast to England and Wales, long leases in Scotland are relatively rare. In 1974, legislation restricted the maximum length of newly created residential leases to 20 years with further legislation in 2000 restricting the maximum length of newly created commercial leases to 175 years. This latest legislation in 2012 will now operate to abolish those remaining historic long leases which the Scottish Government consider grant a tenant a right more akin to ownership than the right of a tenant under a lease. The result is that the landlord will have no further interest in the property and the tenant will become the owner.
To qualify for conversion, a lease must:
- Be registered
- Have originally been granted for a term of more than 175 years
- Have more than 175 years of the term left to run (if non-residential)
- Have more than 100 years left to run (if residential)
- Have an annual rent of £100 or less
- Not be a lease of a harbour in respect of which there is a harbour authority
- Not be a lease of minerals
- Not be a lease granted for the sole purpose of installing and maintaining pipes or cables
As from 28 November 2015 the following happened:
- The tenant’s interest under a qualifying lease automatically converted to ownership.
- Tenants could chose to opt out of the legislation but landlords could not.
- Compensation may have become payable to the landlord for loss of rent or other rights.
- Certain lease conditions automatically converted into title conditions affecting the tenant’s new interest in the property for the benefit of neighbouring properties. Other lease conditions may have converted to title conditions on registration of a notice by the person entitled to enforce the condition.
- The landlord’s title was extinguished on 28 November 2015 and any standard security over the landlord’s title ceased to have effect.
- Any standard security over the tenant’s interest in a long lease will remain and the tenant will own the property subject to that security.
If a lease has not already been registered in the Land Register, the tenant (now owner) may apply for voluntary registration of their interest in the Land Register. As noted above title conditions affecting the original owner’s title will remain in place and some conditions in the lease may convert into encumbrances burdening the property. For example if there are any access or other rights benefiting the lease, these will transmute into rights benefiting the property.
Suc matters will need to be considered as part of any application for registration of a disposition of the property or application for a voluntary registration in order for the Land Register to be accurate.
If you need further information about the above or I can assist you in any way then please contact me Ross Leatham by phone 0141 552 3422 or email firstname.lastname@example.org