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Ashworths Solicitors LLP

Nisha Saigal, Solicitor

Setting up a business requires careful planning and it is best to focus on one aspect at a time starting with market research, creating a business plan and considering the best legal structure.

If you are an off-line business you will also need to select a premises from which to operate. With budget being one of the main concerns of any new business a short-term lease of a premises is generally the most preferred option over purchasing a long leasehold or freehold. This article looks at some of the key points for you to note when taking a short term lease of a business premises.

Length of lease It is difficult to predict at the outset how a new business will perform and for this reason you should avoid getting roped in to signing a lengthy lease. Whilst a lease should be short enough so that you have a financially manageable commitment it will also need to be long enough to allow you to test the viability of the business.

Where a landlord is only willing to grant you a long lease it would be entirely appropriate for you to request an early termination provision part way through the lease allowing you the flexibility to terminate early or to remain in the premises should you wish to do so.

Statutory Protection for Business Tenants As a tenant of a business premises you would no doubt have invested time and money in establishing your business and customer base from a certain premises. It would therefore be considered unfair for a landlord to simply take back the premises at the end of the term and

Starting up a Business and Selecting the Right Premises for You

benefit from the established business or even pass this on to another tenant. The Landlord and Tenant Act 1954 grants you statutory protection by affording you an automatic right to renew your lease on similar terms as your previous lease.

It is possible for this statutory protection to be waived and many landlords may require you to give this up as a condition of entering in to a lease. Where this is the case you should ensure that you fully understand the implications of the rights which you will be giving up.

Repairs You will need to consider the extent of responsibility for repairs which you will have under the lease and in particular, to ensure that they are not too onerous, regard being had to the length of the lease. For example, as a tenant of a 3 year lease it would be unreasonable to expect you to be responsible for repairs to the structure of the premises as this could extend to replacement of the entire roof! It would be more appropriate for your repairing obligation to be limited to just the interior of the premises with any responsibility towards the structure expressly excluded.

For longer leases it is not uncommon for a landlord to require you to make contributions towards the upkeep of the building, including the structure. As a tenant of a longer lease you will take the benefit of such maintenance works which may reflect positively on your premises.

Where possible you should try to inspect the premises carefully before committing to a lease and we suggest appointing a surveyor

to help identify any defects. It is often a good idea to attach a photographic schedule of condition to the lease to evidence the condition of the property at the beginning of the lease. This will help to avoid any disputes later on relating to dilapidation claims against you.

Subletting and Assignment You may find at some point during the lease that you are struggling to meet premises costs or that the premises are no longer fit for the purpose of the business. In these circumstances it would be beneficial for you to have the option to sublet the lease or to “assign” (i.e. sell or transfer) the remainder of the lease to another tenant. Where the lease allows you to sublet or assign you would effectively pass on your responsibilities under the lease to another willing tenant. Most landlords would however still look to keep you “on the hook” in the event that the new tenant defaults under the lease and you should be aware that you could be financially responsible for such defaults. For this reason you should carry out necessary checks to ensure that the new tenant is of sound financial standing before you agree to sublet or assign.

In addition to the above points there are also other terms which need to considered which may impact on your business and finances. Please contact the Commercial Property team at Ashworths who will be more than happy to assist you with your property matters.

Ashworths Solicitors LLP The Old Exchange, 12 Compton Road, Wimbledon, SW19 7QD 0845 370 1000 Fax: 0845 370 1001

Ashworths are specialist property solicitors based in Wimbledon. As well as dealing with the sales and purchases of

houses and flats, we also act for house-builders and companies (both locally and nationally) to satisfy their commercial property requirements. Call us on 0845 370 1000 for a no obligation quote. . January 2015 . 101

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