Clients’ Obligations and Liabilities and Legal Rules Relating to Lease Renewals

Commercial Street 1

In this particular case, there is a two storey retain unit that vacant and to let. This particular property has been void or vacant for the past six months. At last a prospective tenant has shown interest in the unit but has requested a three year lease with six month’s rent free with a break option at the end of the first year. The rent value of this particular facility is at$12,500 per year. This is a classic case of a residential lease given the fact that the tenant wants to rent space of a home to personally reside in (Thomas, 2001). Tenants of residential property have more government protection compared to those of commercial property since in this case; the tenant is viewed as a weaker party in this case hence prompting the government to protect such persons from the exploitation of the owners of the property (Kur, Planck, and Dreier, 2013). Given the fact that the property has been lying idle for a relatively along time without the hope of ever finding a client it is prudent for the property owner to strike a deal with the prospective client who is to  be the tenant in this case (Sheehan, 2017). The only important thing is that since the tenant wants to be given a break option at the end of the first year, then it would be prudent for the terms of the contract or rather the lease agreement to be formulated to the extent that the contract will be renewed on an annual basis meaning that the tenant will have been given freedom to elect whether he wants to continue residing in the building or vacating it. Such is a mandatory requirement since such lease agreement can only be valid in the circumstances where they have definite terms as it was established in the leading case of Furness v Bond (1888) 4 TLR 457). The landlord has also the option of expressing the terms of lease impliedly in the event that there are no clear terms stipulated as it was also held in the landmark case of Harvey v Pratt [1965] 1 WLR 1025).

The third option will also for the landlord to opt to lease the property for unspecified period though this was only allowed during the times of war later of which it held to be invalid after the war time had lapsed as it was in the case of Lace v Chantler [1944] KB 368. Based on these brief facts, it would thus be prudent for the lease agreement to be formulated to the extent that it allows for period of the lease to be very definite from the date of commencement and the date of termination. This should also provide an option for the renewal of the contract at the consent of both parties without any duress (Sinha, 2018). The demand that the tenant be allowed a six-month free rent should be disallowed since this would be equivalent to using the property for free or if not then both the potential client and the landlord should reach a compromise to have the period of rent free cut short and be inculcated in the contract of lease failure to which it may not be enforceable at law in the event of any breach. Also in this respect, it would be prudent foe the lease agreement to contain a clause to the effect that the tenant will have to pay the rent in bulk and on annual basis meaning that the next rent will only be paid after the lease agreement would have been renewed (Dutfield, 2017). The tenant should also be meant to be liable for all the damages that will accrue to the property during his stay there since he is under an obligation to ensure that the facility is well maintained and at his departure, everything should be restored to their original position.

Commercial street 3

Legal Principles in the Operation of Business Leases

This particular case involves a two storey retail unit which is to let to Betty’s Café on a 3 year FRI lease commencing on the 5^th March 2016. Betty has had some trading difficulties due to a recent spate of poor reviews on Trip Advisor. This has resulted to her missing a 3-months’ rent and at the same time she is behind with business rates and utility bills. The rent passing which is that payable at a given point in time stands at $10,500. This is purely a commercial lease agreement since the premises are leased out for business purposes. in this kind of arrangement, the tenant enjoys very little government protection given the fact that the two parties are believed to be fully aware of the engagements that they are getting into hence there is no weaker party that needs increased government protection for the purpose of ensuring that they are not exploited by any standard. In this regard, the tenant has suffered serious business losses that have led her into not being able to pay for the rent due and also default in the utility bills and business rates. In this kind of scenario, it would be important for the property owner to give the tenant a grace period within which she is supposed to have cleared the rent areas since the circumstances that may have led to her default were beyond her control and hence she cannot be wholly blames (Raustiala, 2017). The tenant also has rights that cannot violated by any standard and as such, it is prudent for the property owner to allow her sometime to clear the outstanding balance as sending her out of the property may mean that she may never pay for the outstanding rent areas if sent away and at the same time the utility bills such as water and electricity that may have accrued may as well never be paid for by her and the landlord will under this circumstance be liable to carry the costs (Prime, 2017). It is thus natural for the landlord and the tenant under consideration to make sure that they reach a deal on the manner in which such outstanding balances are going to be paid within a specific period of time and without any difficulties by all standards.  The first step in this respect will be to write a letter to the tenant requesting for the payment of the rent areas.

 If within 14 days she will not have paid then the landlord will have to do another letter to the guarantor and after 21 days of this action without any rent paid, then the landlord will have no option but to do another letter to the tenant (McMahon, 2018). Failure to comply with the payment demands will mean that the landlord will have to repossess the property. This particular approach is however only ideal in circumstances in which the landlord is not aware of the reasons for the default since the tenant may not have taken any initiative to explain why they had to delay the payment. Based on the facts of this case study, there is no need for such a lengthy procedure to be pursued and as such, the landlord should only agree with Betty on when she was going to make up for the rent areas since what happened was totally outside her control and as such, she cannot be blamed and at the same time the government will protect her even from being evicted in the event that she approaches the courts for intervention where the landlord fails to be reasonable and accept an amicable payment deal as it was held in the recent case of R (Gaskin) v LB Richmond Upon Thames (2018) EWHC 1996.

Valuation and Management Implications of Lease Covenants and Statutory Obligations

Commercial Street 5

In this case, a two storey retail unit let to Get Well Pharmacy on a 6 year FRI lease commencing on 12^th March 2016 with a 3 yearly rent reviews. This property is under-rented. The rent review clause in the lease states that the rent reviews must be triggered no earlier than three months and not later than 2 months prior to the review date meaning that time shall be of great importance in this respect. The rent passing is $8,000 for this facility. In this respect, the passing rent is below the estimated rental value of the property. Under such an arrangement, it is evident that the tenant is paying less in terms of the rent since the rent being paid is described as being under rented as it falls way below the true market value of the property under consideration (Maxwell, 2018). In this regard, it would be prudent for the landlord to make sure that the first lease that will go for 3 years uninterrupted to expire first before taking any action as to increase the rent payable for the tenant to be able to pay back rent that is equivalent to the true market value of the property (Martin, 2018). Such rent reviews should thus be triggered within the provided time of 3 months before the expiry of the first agreement by all standards since this is the only way through which he will be deemed to have acted within the provisions of the original lease agreement that provided for such a requirement. It will thus be important for the landlord to come up with the true value of the facility and be able to provide the rent that is commensurate with this particular value. There should be no cases of over-rent under the renewed agreement since this may be in violation of the Tenancy Act that is supposed to guide such covenants in the UK and in other parts of the world since such agreements are common as people continue to invest in real estate and rent out property to investors or business persons (Weatherall, McCarthy, and Bright, 2017). This is virtually a very delicate arrangement since it calls for both the landlord and the tenant to be involved in the property valuation exercise through their representatives so as to ensure that the highest degree of accuracy is established to avoid the case where one party exploits the other by any standard.

Commercial street 7

In this case, a storey retail unit to let to Hair Heaven which is a hairdressing salon on a 12 year FRI leases commencing on the 1^st April 2006. This is a long standing tenant who would like to renew the lease but owing to the retirement plans in the next 5 years would only opt for a 5-year term. The passing rent is $10,000 per year. In this kind of lease agreement, the tenant is entitled to ensure that he repairs the facility at his own cost without involving the landlord by any standard. This also extends to the case in which the facility is in need of repair at the commencement of the agreement and there is the special insurance to it (Dicey, 2017). Based on the facts of the provided case, it is prudent for the landlord and the tenant in question to go ahead to renegotiate the terms of the lease and cut it down to 5 years since the demands of the tenant regarding his retirement are real and objective and as such, they cannot be ignored or dispensed with. All that will be necessary is for the landlord and the tenant to strike a deal and readjust the rent repayment for the period of 5 years by all standards considering that this has been his long serving client that lacks any history of default or misusing the property under consideration. Even the fact that the it is a FRI lease means that the tenant will have to repair the facility and put it in the usable state at the end of 5 years which will be the new lease period and as such, there will be nothing that the landlord will lose as long as he gets another tenant to lease to the property on time (Chang and Smith 2018). A good lease contract should be relatively flexible to accommodate such unforeseeable circumstances.

Drafting Heads of Terms and Key Lease Clauses

Commercial street 9

This involved a two storey commercial unit used as an office and occupied by Numbers plus Accountancy. The lease has expired and the tenant served a Section 26 Request on the landlord on the 15^th July 2018 requesting a new 3 year FRI lease at a rent of $9,000 per year. The rent passing is $ 10,500 per year and as such, the landlord would like to repossess this property and redevelop 9 and 11 commercial Street into a large single unit. Under such circumstances, the landlord will have to repossess the facility in question without incurring any damages on his part. This is based on the fact that first, the property was under-valued and the current tenant has no option but to vacate the premised for it to be re-developed as per the demand of the landlord (Bonfield, 2018). A contract is supposed to be an agreement that all parties enter into without any force or pressure from whichever quota. In as much as the  Numbers Plus Accountancy may have served the renewal request as required under Section 26, this does not bind the landlord to accept it as he also reserves some rights such as to repossess his property and develop it so as to increase its market value ad fetch increased rent from it without any limitations.

Commercial Street 11

In this particular case, a two-storey commercial unit is used as an office by Perfect Job Ltd which is a recruiting agent and the lease was effective from the 1^st June 2016 for a period of 5 years with no reviews, no breaks. Rent passing is $11,000 per year. In this respect, the landlord will have no option but to allow the current occupant to finish his term in the year 2021 since the terms of the lease were very clear to the effect that there were to be no reviews or breaks and as such, it would be a breach of the lease agreement for the purpose of developing this particular property to increase its value (Bhandar, 2018). The tenant will continue to pay the rent due till the expiry of the term of the lease agreement unless the landlord is ready to pay for the damages that may accrue from the breach of the contract.

Commercial street 13

Based on the facts of this case, the tenant of the shop will have no option but to vacate the premises since he has admitted on his part that he can no longer afford to pay the rent since it is too high in as much as the landlord is supposed to carry out all the external repairs. Under such circumstances, the tenant is at the mercy of the landlord who may choose to reduce the annual rent payable so as to accommodate the financial constraints of the tenant if they have had good relationships in the past however the landlord is not under any legal obligation to renegotiate the rent downwards with the tenant (Berger, 2017). It would thus be very prudent for the duo to strike a deal of a single 5 year term to accommodate the demands of the present tenant.

References

Berger, C., 2017. Common European Property Law, vol 1, Fundamentals, Objects of Legal Protection of Property Rights, Types and Manifestations of subjective Property Rights.

Bhandar, B., 2018. Colonial Lives of Property: Law, Land, and Racial Regimes of Ownership. Duke University Press.

Bonfield, L., 2018. Reforming the Law of Will Execution: The Real Property Commissioners’ Reports. Available at SSRN 3251369.

Chang, Y.C. and Smith, H.E., 2018. Convergence and Divergence in Systems of Property Law: An Empirical Analysis.

Dicey, A.V., 2017. Lectures on the relation between law and public opinion in England during the nineteenth century. Routledge.

Dratler Jr, J. and McJohn, S.M., 2018. Intellectual Property Law: Commercial, Creative and Industrial Property. Law Journal Press.

Dutfield, G., 2017. Intellectual property rights and the life science industries: a twentieth century history. Routledge.

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Gibson, J., 2017. The authenticity and scope of the ‘product’within intellectual property is both presented and at the same time confounded by the law. The orientation of the law on the product is itself shifted and repositioned by technological, social, and cultural factors in law. Finding the product in a volatile theoretical and legal environment is at stake in each of the articles in this issue.

Janssens, M.C., 2017. The legal and institutional framework of International and European intellectual property law & impact of Brexit on IP law.

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