Legal Practice Notes

Repair and improvements Tenants are ordinarily not required to fund a landlord’s upgrades or enhancements to the property, as distinct from repairing it. The term of a tenant’s lease influences what it is reasonable for the tenant to contribute, even where service charge clauses are cast in broad terms. However, a covenant to provide services is wider and potentially more burdensome than a covenant to repair, and may permit a landlord to recover expenditure on works that extend beyond mere repair. In those circumstances, the recoverable service charge is the cost of delivering the service, and the repair versus improvement distinction is unlikely to matter. See News Analysis: Covenant to provide services goes beyond covenant to repair ( Southwark London Borough v Baharier). Where a lease obliges the landlord to consult tenants before embarking on major works, sums spent without that...

A landlord of commercial premises may carry express or implied obligations to supply services for the benefit of the tenant or tenants. Express covenants A promise to deliver a service creates a broader and potentially more burdensome obligation than a mere covenant to repair, and may, consistent with the tenant’s liability to pay the service charge, allow a landlord to recover the expense of works that go beyond repair. In such situations, it is the cost of delivering the service that makes up the service charge, and the line between repair and improvement is unlikely to matter: see News Analysis: Covenant to provide services goes beyond covenant to repair ( Southwark London Borough v Baharier). If a landlord does not act in a timely manner, it may ultimately be unable to recover the entire cost of repairs......

If a certificate is required to determine the service charge, Urban Splash Work Ltd v Ridgway and another [2018] UKUT 32 ( LC) confirms there is no overarching rule that providing certified accounts is, or is not, a condition precedent to liability for service charges (rather than simply part of the payment ‘machinery’)—the outcome depends on the exact lease wording and there is no generally applicable principle. Landlords should take care not to draft around circumstances personal to them, which could render the certification procedure unworkable once the reversion is assigned. In that event they would need to sue to recover the service charge because there would be no contractual route to obtain it (and, depending on the drafting and the circumstances, recovery might not be possible at all). There must be an express clause creating a duty to pay on account, as such an...

ARCHIVED : This Practice Note has been archived and is not maintained . The Commercial Rent ( Coronavirus) Act 2022 ( CR( C) A 2022) preserves and broadens the safeguards afforded to commercial tenants during the coronavirus ( COVID-19) crisis. It achieves this by ringfencing rent and service charge arrears built up while premises were mandated to shut, and by creating a statutory arbitration scheme through which sums can be written down or repayment postponed. A moratorium on landlord remedies also applies to shield tenants whilst arbitration is ongoing. Core provisions of CR( C) A 2022, together with the government’s Commercial rent code of practice following the COVID-19 pandemic (the Code), are outlined below. The government has additionally published statutory guidance on the Act’s terms. The window to commence arbitration has now closed, and with it the moratorium on landlord remedies where no...

Flexible loan structures In the wake of the financial crisis, mainstream bank lending pulled back, creating space for non-bank lenders ( NBLs) such as insurers and real estate debt funds. Through 2012 and 2013, this gap allowed NBLs to consolidate their position and become established market participants. With confidence returning to the real estate investment market and banks re-entering from 2014, some NBLs, especially real estate debt funds, shifted up the risk spectrum away from the senior debt arena. This has produced a competitive environment for real estate debt across the capital stack. Banks, insurers and debt funds adopt different approaches, each targeting an optimum deal size, asset class and loan purpose. Four often-used flexible loan structures are: flexible senior loans stretched senior loans mezzanine loans preferred equity loans Flexible senior loans Banks are particularly active in this space alongside some...

This Practice Note forms part of a suite that explores commercial property contract clauses from a purchaser’s viewpoint, identifying practical amendments and matters to look out for in practice—see: Buyer’s practical contract negotiation collection. It concentrates on standard provisions, in particular those addressing arrears in a contract for sale that is subject to leases. In this setting, arrears are sums owed by tenants that have not been remitted to the seller as at completion (including any VAT in respect of those sums). This Practice Note reviews issues emerging from the buyer’s due diligence on arrears, the position under the Standard Commercial Property Conditions ( Third Edition—2018 Revision), how arrears are typically managed in day‑to‑day practice, and it offers pragmatic due diligence and drafting suggestions for buyers. It does not address arrears where a headlease is in play—see instead: Due...

This Practice Note This Practice Note outlines the steps involved in transferring a commercial property. It proceeds on the basis that the asset is a registered freehold or leasehold, is being disposed of with vacant possession or subject to existing lease(s), and is being bought either as an investment or for the purchaser’s own occupation. It sets out the principal sections that map the usual stages of a sale and purchase, with each section signposting Lexis+ UK resources offering fuller guidance on the subjects covered: Preliminary matters Pre-exchange—the due diligence process The contract and exchange Between exchange and completion Completing the transaction Post completion The guidance here is not exhaustive and will not address every eventuality for every transaction. See also: Structure of real estate finance—overview Real estate in corporate...

The majority of the completion and post-completion tasks will be undertaken by the property lawyers: submitting the Stamp Duty Land Tax returns drafting the land registry applications forwarding the title deeds to the lender as security (where applicable) adhering to pre-completion undertakings......

This checklist supports a buyer’s solicitor in conducting an early read-through of the first draft of a contract for the purchase of commercial property issued by the seller, spotlighting the headline matters to verify. At times, the seller’s solicitor may prepare the agreement without fully grasping every point that must be addressed; accordingly, the buyer should stay alert to any omissions from the outset and raise probable issues or contractual needs at the earliest opportunity (even if only noted as a placeholder in the document while awaiting instructions or further detail). Identification of seller and buyer Heads of terms may not capture the parties precisely: Companies House: where the seller is a company, the buyer’s solicitor must confirm via Companies House that the named party and company number in the heads of terms are correct and match the details shown in the title...

This Practice Note This Practice Note explores matters affecting professional photographers who capture images of models or other individuals, as well as the organisations that commission, produce, licence and use photographs for commercial ends. It explains how UK data protection and privacy law applies and should be navigated when photographs are used commercially in the UK. Commercial use means reproducing a photograph in any form primarily aimed at commercial advantage or financial reward, including marketing on a company’s website or its social media channels. While some principles overlap, this Practice Note is not intended to cover editorial use. Press photographers may need to consider additional data protection and privacy considerations, such as the ICO data protection and journalism code of practice or the IPSO Editors’ Code of Practice, and different exemptions may apply. Nor does this note address domestic use limited to purely...

This Practice Note This Practice Note serves as a practical ‘how to’ for assessing an NDA (also referred to as a non-disclosure agreement or confidentiality agreement) and directs you to relevant materials. It sets out a snapshot of what an NDA comprises, when it is needed in a commercial deal, and offers a high-level overview of the legal and practical points to weigh up when considering an NDA. For links to fuller guidance on the law of confidentiality, refer to Precedent: Confidentiality—training materials and Confidential information—overview. For further insight into how confidentiality duties are commonly addressed in commercial agreements, see Practice Note: Trade secrets and confidential information—protection and enforcement. Where confidential information is exchanged, the assumption is that the disclosing party will usually prepare and circulate an NDA, with the recipient undertaking review. That said, in many circumstances information flows both ways, making it...

At its most basic, a commercial letter of credit is a bank’s promise to pay the named beneficiary a set amount within a defined timeframe, upon presentation of stipulated documents (eg the shipping papers for the goods sold to the buyer), in line with the terms of the letter of credit. A commercial letter of credit may take the form of: an unconfirmed letter of credit — typically involving an issuing bank and an advising bank; or a confirmed letter of credit — involving an issuing bank and an advising bank that also acts as confirming bank The parties to a commercial letter of credit each have distinct rights and obligations. For further information on commercial letters of credit in general, see Practice Notes: Characteristics of commercial letters of credit, and Types of commercial letters of credit Key parties to a typical commercial letter of credit...

Commercial lending often funds sizeable corporates. Yet a significant number of deals also involve an individual—for example, someone may give a guarantee and/or secure a business loan against their home—a partnership, or a small or medium-sized enterprise. Accordingly, lenders must recognise when consumer-focused legislation might apply, as it could be pertinent to such arrangements. Consumer credit law The primary statutes in this area that lenders should note are: the Consumer Credit Act 1974 ( CCA 1974) the Financial Services and Markets Act 2000 ( FSMA 2000) the Financial Services and Markets Act 2000 ( Regulated Activities) Order 2001, SI 2001/544 ( RAO) The Consumer Credit Act 1974 and related legislation CCA 1974 aims to protect consumers by establishing a comprehensive framework governing consumer credit, consumer hire and other categories of consumer credit agreements. It introduced a new regime under which...

Who insures? Joint insurance From a tenant’s standpoint, the preferred arrangement is for the premises to be insured in the joint names of the landlord and the tenant. For the tenant, the key advantages are: both parties are alerted before the policy comes up for renewal or lapses any insurance proceeds are payable jointly to landlord and tenant, giving the tenant influence over how the funds are applied (and therefore over the reinstatement of the premises) there are no detrimental effects if the landlord enters liquidation before reinstatement is carried out the insurers cannot rely on their right of ‘subrogation’ (see Subrogation below) against the tenant for damage the tenant caused or contributed to Nevertheless, in many cases arranging insurance in joint names will not be practical......

Practice Note overview This Practice Note reviews the stages in negotiating commercial leases in England and Wales compared with Scotland, spanning pre-contract, contract, post-contract, completion and settlement, and post-completion and settlement... England and Wales / Scotland Pre-contract The tenant submits pre-contract enquiries to the landlord. The tenant undertakes due diligence, ordering required material such as official copies of the landlord’s title, land charges searches, coal mining reports and local authority enquiries. The landlord circulates a draft agreement for lease (incorporating standard conditions of sale), the draft lease and any other necessary drafts, for example a licence for fitting-out works. The parties negotiate the draft documents. The landlord secures any third-party consents needed for the lease, e.g. head landlord’s approval or a bank’s consent where there is a legal charge over the property. Once the paperwork is agreed, if...

Tenant covenants and the service charge framework dictate whether the occupier must fund works connected to the land, buildings and fixtures, including: energy efficiency upgrades asbestos surveys and remedial measures improvements arising from fire risk assessments upkeep of above-ground and underground storage tanks ( USTs) maintenance of drainage networks site investigations, land remediation and monitoring duties For guidance on negotiating these clauses, see: Lease transactions toolkit (environmental issues)—negotiation tactics acting for the landlord and tenant. For more on service charges, consult Practice Note: A review of the RICS Professional Standard on Service Charges in Commercial Property (2nd edition). Timing The timetable and tasks for the lawyers will be shaped by factors such as the property issues revealed by the Commercial Property Standard Enquiries ( CPSE) replies and due diligence, the clients’ negotiating position, and whether environmental audits are needed. Asbestos management surveys or phase 1 environmental audits typically take five to ten days....

This Practice Note sets out how rent review clauses operate in commercial leases. It also summarises the processes for resolving rent review disagreements by arbitration or expert determination. It does not address agricultural rent reviews; for those, see Practice Notes: Rent review under 1991 Act agricultural tenancies in Scotland and Rent review under 2003 Act agricultural tenancies in Scotland. Need for rent review Rent reviews enable commercial rents to be aligned with market conditions at the review date. They appear most often in longer commercial leases. Reviews occur at the intervals agreed in the lease’s rent review clause, typically every three to five years, though this may differ. In addition to specifying the dates, the lease should set out the method to be used for the review. Several approaches are available, discussed below; however, the open market rent basis is the most prevalent. For further detail, see:...

Who takes responsibility for contaminated land liabilities? Where legacy land contamination is a concern, or the tenant’s operations involve polluting activities, the parties will need to address in the lease who assumes responsibility. That decision concerns any potential contaminated land liabilities. Standard clauses in leases If a lease is silent on environmental matters, several non-environmental provisions may still have implications for environmental liability. The points below flag common lease clauses to watch for. Extent of the demise: Confirm whether the term ‘premises’ captures land (including surface water and groundwater), above-ground storage tanks, underground storage tanks and pipes. Covenant to comply with statutory obligations: Where either the landlord or the tenant receives a statutory notice, or a regulator requires works (for example, the landlord is threatened with a remediation notice or works notice), the landlord may rely on this covenant to pass the costs...

The practical lease negotiation collection serves as a guide to commercial property lease negotiations. Every Negotiation Guide in this collection spotlights a key clause, sets out market norms and the objectives of the landlord and tenant, whilst assessing any possible gaps or hazards for landlords and......

This Practice Note This Practice Note outlines the common law position and explores standard drafting practices in Scottish commercial leases, addressing landlord and tenant duties connected to insurance, insured and uninsured risks, reinstatement, rent suspension, and the circumstances in which termination may arise where the premises have been damaged or destroyed during the term. Where a lease is silent on repairing obligations, the landlord must put right any want of repair within a reasonable time after the tenant has notified the landlord of the requirement; refer to Practice Notes: Repair clauses in commercial leases in Scotland— Repair under the common law and Repair and dilapidation disputes—commercial leases in Scotland and Repair: Stair Memorial Encyclopaedia [501]. If the subjects are destroyed, or so damaged as to be unsuitable for use and occupation, the lease is terminated by the rule of rei interitus. It is usual for...