When considering a lease transaction, whether as a landlord or a tenant, it can be tempting to go without professional legal advice, as you may think that the legal costs could be disproportionate given the low rental value.
Unfortunately, low value does not equate to low risk. Lease agreements, regardless of value, contain complexities and potential pitfalls and so, even where it seems simple, seeking proper legal advice can prove invaluable.
Unseen risks
Lease agreements are legally binding documents that come with significant obligations for both parties above and beyond the annual rent.
Without proper legal advice as a tenant, you may inadvertently agree to:
Unreasonable and expensive repair and maintenance obligations;
Hidden service charges and unexpected costs;
Unfair break clauses or overly restrictive assignment and underletting provisions, limiting your flexibility in the future;
Unclear and ambiguous terms which result in future disputes.
Without proper legal advice as a landlord, you may:
Agree to insufficient terms that don’t properly protect your interests;
Limit your options to forfeit the lease should the tenant fail to comply with their obligations;
Unwittingly grant a lease with security of tenure, permitting the tenant an automatic right (save for a few exceptions) to a new lease at the end of the term;
Cause issues with current or future lenders, where standard or specific requirements have not been satisfied.
These issues arise in all leases, and their value does not reduce the potential for costly mistakes.
Complying with legal requirements
Even with low value leases, there are numerous legal requirements and statutory protections to consider, including:
Registration requirements at the Land Registry;
Potential Stamp Duty Land Tax or Land Transaction Tax obligations;
Energy performance and other regulatory certificates.
Failing to meet these obligations can result in disputes, fines and invalid leases.
Peace of mind
While it’s natural to be cost-conscious with a low-value lease, the expense of professional legal advice is often far less than the cost of rectifying problems later. Early involvement by a solicitor can prevent disputes, streamline negotiations, and provide you with peace of mind that the matter has been dealt with properly.
No matter the size or value of your lease transaction, obtaining legal advice ensures that your interests are properly protected and that you’re aware of all your obligations before you agree to them. If you’re considering a new lease on a commercial property, contact a member of our Commercial Property team, who will be happy to help.
