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Property: What is a Lease?

As your business grows, you are likely to want to rent premises, and property issues are therefore going to be very important.

Once you have found suitable premises which you wish to rent, you will need to enter into a Lease. It is important before signing up to the Lease, or any legal documentation, that you obtain legal advice.

What is a Lease?

A Lease is a legal document that sets out the rights and obligations of a tenant and a landlord, where a tenant is renting premises from a landlord. If you only wish to occupy the premises for a short time, perhaps for a few months, the landlord may instead grant you a licence to occupy the premises, rather than a lease. The main difference between a Lease and a licence to occupy is that the tenant under a Lease has “exclusive possession”, meaning that the tenant can exclude both the landlord and any third parties from the premises.

There are many considerations which you as a tenant will need to take into account when you are entering into a Lease. Some of the main terms of a Lease, which will be particularly important to you and your business, are set out below.

Term 

The Term is the duration of the tenant’s occupation of the premises. You may wish to rent the premises for just a few months, or for several years, but you should be certain that the Term of the lease is convenient for your business needs.  

Usually, a tenant’s Lease at the premises will end on the last day of the Term which is when the tenant will have to move out. However, as a business tenant, you may have “security of tenure” which means that the Lease will not end on the last day of the Term and will simply roll on beyond that date. If the Lease does not have “security of tenure”, the landlord will have to send the tenant a notice informing them of this, and the tenant will need to swear a declaration that they have accepted this, before the Lease is entered into.

Break Clause

Often a Lease will contain a “break clause”, meaning that either the tenant, or the landlord, or both, are able to end the lease before the end of the Term on a certain date, or on any day after a certain date, usually provided that written notice is given to the other party. This is beneficial to you as a tenant because it gives you comfort that if for any reason you no longer wish to occupy the premises for the entire duration of the Term, you have the ability to move out at an earlier date. However, there are likely to be certain conditions which a tenant will have to fulfil before it can enforce its break right, such as ensuring that all the rent is paid, and that all other obligations in the Lease have been performed.

For more information about Olswang go to http://www.olswang.com/main.asp?sid=193

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