Information supplied by Ereira Mendoza

Tenants Obligations

In the UK when a tenant enters into a lease the tenant has various obligations to the landlord as does the landlord have various obligations to the tenant. The tenant undertakes to pay an agreed rent to the landlord for a fixed period of time. In addition there are other payments as follows:

Business Rates

Business rates are local taxed levied on commercial occupiers and payable to local Government. All commercial property is ascribed a value intended to reflect its type, size, quality and location.

Service Charges and Building Management

A pleasant working environment in business premises can depend on the quality of its management. Comfort, safety and general well being of tenants are directly effected by management services. These effects are also financial. A buildings operating expenses including management services are passed on to the tenants in the form of service charges. This cost can vary greatly depending on the various facilities both in the building and the make up of the service charge, i.e. a commissionaire reception, air conditioning, lift etc. 

Repairing Covenants

The majority of leases in the UK are taken on a Full Repairing and Insuring basis. This means that as a tenant you are responsible for your proportional upkeep and repair of the building. We therefore strongly recommend any prospective tenant to carry out a building survey through a chartered building surveyor that will determine the condition of a building, analyse the full extent of any defects and provide budget costs to recognise the extent of any defects. The findings of the survey may not only be a material factoring in the decision whether or not to take on the lease but may also provide useful ammunition in negotiations. Unless offering the landlord a strong covenant a tenant can expect to have to offer the landlord a rent deposit which will form part of the overall negotiation.

Covenant

Most landlords’ prime concern is the ability of any incoming tenant’s financial strength in order to comply with all their obligations of the lease. Covenant strength is a concept used to describe the effective net worth of the company and the stronger the covenant the greater the chance of beating off competition for the space and also the greater the ammunition to use in negotiations.