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Don’t get fleeced over your commercial lease

Don’t get fleeced over your commercial lease

A good Landlord and Tenant relationship can often mean that the renewal of a commercial lease is done so privately and without the help of a Solicitor.

However by doing this the parties are unlikely to obtain the consent of a lender who has a charge registered against the property. Whilst the consent of such a lender may have been obtained on the original lease, it is important for both Landlords and Tenants that this is acquired on any renewals or variations of the lease.

From a Tenant’s perspective, failure to acquire the lenders consent has different implications depending on the type of lease you are entering into. The primary concern is that, should the Landlord default on his mortgage, the lender is entitled to repossess the property under their mortgage agreement. Without the consent of the lender to the lease, a Tenant has no right to occupy the property and the lender can sell the property onto a third party free of the lease.

Tenants should also note that lenders may be able to carry out enforcement actions even if a Landlord hasn’t defaulted.

Furthermore, where a lease is granted for more than seven years it is required to be registered at the Land Registry. The Landlord’s title will contain the lender’s charge which is typically protected by a restriction on any disposition of the Landlord’s title and would accordingly require evidence that the consent of the lender has been obtained. Without this consent, the lease cannot be registered.

Finally, it is important to note that the lender is under no obligation to provide a decision quickly or even to consent to the lease. When acting for Landlords or Tenants, the Lawson-West Commercial Property team raise the issue of consent early on in the transaction to help to avoid any unnecessary delays.

If you are a Landlord or Tenant and want to be assured you receive the best advice contact Bev, Palbir or Rebecca on 0116 212 1000.

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