Commercial property issues to consider when selling your business
When your commercial landlord grants you a lease, you can expect to use the property to carry on your business without interruption. But what happens if your landlord wants to carry out works to adjoining properties? The lease should set out when and how this can happen. Unexpected events and problems could also arise which interfere with your use of the property, such as severe weather, a major incident like a fire or explosion, or even another pandemic.
If you find that you are unable to carry on your business, you will want to understand your legal position, your rights and your options.
Commercial leases try to anticipate future events that will affect your right to use the property and set out what should happen. Most of the time this works well, but occasionally something will happen that nobody has foreseen.
Whatever the situation, the starting point will be what your lease says.
Quiet enjoyment and non-derogation
Your landlord will have a number of obligations under the lease but the fundamental one is the landlord’s covenant for ‘quiet enjoyment’. This means that you should be left to run your business from the property, with limited rights for the landlord to come into your premises. Linked to this is the idea of ‘non-derogation’, which means that the landlord must not do anything which would interfere so fundamentally with your use of the property that you no longer have what you bargained for. The principle is that the landlord cannot give with one hand and take away with the other. For example, if you had a unit in a shopping centre and the landlord unexpectedly closed part of the centre so that footfall to your unit was significantly reduced, you could have a claim for damages.
Landlord’s rights to carry out works
Your landlord will want the right to carry out works to any adjoining properties they own and, if your unit is part of a larger building, to those parts that are not let to you or other tenants. These works may not be limited to necessary repairs, but could also include alterations and redevelopment. Even where your landlord is exercising a clear right to carry out works, they must do everything reasonable to minimise disturbance to you and any other tenants while the works take place.
The challenge for your landlord is to find the right balance between their right to do the works and your right not to be disturbed. Your precise rights depend in part on exactly what your lease says and the nature of your business. As a general rule, your landlord should give you a reasonable amount of notice before works start and should discuss with you exactly what the works will involve.
You should have the opportunity to point out any aspects which are likely to be particularly disruptive and your landlord should take reasonable steps to minimise the impact on you and your business. Scaffolding and hoarding are often necessary, but can have a big impact on tenants. If your business relies on your property being visible and easily accessible to customers, your landlord should consider ways to reduce the impact, possibly by using towers at ground level or by clear signage if hoardings have to be erected in front of your property. The landlord’s rights in the lease are the starting point for any discussion, and your solicitor will be able to review them and explain your position.
Unexpected events
Your lease will contain detailed provisions about insurance of the property. The usual position is that the landlord will insure the building, so that if something unexpected happens and the building is damaged, there will be insurance money to reinstate.
As the tenant, you will want to know that if you cannot use the property, your rent will be suspended until you can go back in. Your lease will usually provide for a period of up to three years during which you do not have to pay rent and the landlord is expected to reinstate the property. If your unit is still not usable at the end of the time, you may have the right to end the lease so you can look for new premises. Things are less predictable if you are unable to use the property because something happens which is not covered by insurance. This could be because insurers have refused to cover certain risks – in some cases, terrorism and flood may not be covered – or because the situation is unprecedented. The impact of the Covid pandemic in 2020 is still fresh in everyone’s mind. Nobody had foreseen a situation in which so many businesses were forced to close their premises. Many tenants were shocked to discover that this was not covered by insurance and that they had no right to stop paying rent. As a result, some leases now have specific drafting to deal with the impact of a future pandemic. If this is important you should ask your solicitor to try to negotiate it on your behalf, although many landlords are reluctant to agree to it.
If you have a retail business, some or all of your rent may be calculated as a proportion of your annual turnover. Leases drafted on this basis are complicated, so you should ask your solicitor to explain how the turnover calculation is affected if you are forced to close the premises because of work being carried out by your landlord or for other unforeseen reasons.
Landlord’s exclusion of liability for events beyond their control
If your unit is part of a larger building, your landlord will probably have obligations to provide a range of services such as heating, lighting, water and possibly lifts or other machinery. In normal circumstances, you would have a claim against the landlord if they failed to provide these services but your lease may have an exclusion of liability for events beyond the landlord’s control. The law on exclusion clauses is quite complex and, if you find yourself in this situation, your solicitor can explain what rights you have.
How we can help
If something is interfering with your ability to use your business premises, you will want to know what to do as soon as possible. Our commercial property experts are here to advise you on your rights and on the best tactics for resolving the situation quickly. For further information, please contact Alex Fenegan, partner in the commercial property team on 020 7400 1558 or email alex.fenegan@bracherrawlins.co.uk.
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