In the world of commercial leases, Heads of Terms list the main points (pre-agreed by the landlord and the tenant) to be included within a commercial lease. Generally, surveyors will act on behalf of landlords and tenants to agree the level of rent and other key terms of the lease before the lease itself is completed.
As lawyers, our role historically begins once Heads of Terms have been agreed. However, more recently we’ve tried to persuade our clients, particularly those in the leisure and hospitality sector, to utilise our expertise to their advantage, prior to formal agreement of Heads of Terms.
Whilst we are not able to advise on the levels of rent, we have been demonstrating expertise in giving our tenant clients tips and ideas of concessions to request when negotiating with landlords and surveyors which ultimately save our clients’ money, increase our clients’ flexibility and minimise our clients’ risk.
This applies in relation to rent reviews as well.
Getting a good deal from the very beginning places a tenant in a much better position.
What can we do for you and how is this relevant to the leisure and hospitality sector?
Broadly speaking, our input, prior to formal agreement of Heads of Terms, would be a useful tool to all tenant clients. Having knowledge of the nuances involved with leisure and hospitality is crucial to negotiating the right elements when it comes to commercial leasing.
With this in mind, there are three key areas through which legal advice proves integral in making the most out of the commercial leasing process:
- The importance of flexibility
We appreciate that the leisure and hospitality sector needs the flexibility to grow and expand, so our preliminary guidance on break clauses and alienation rights (a tenant’s right to transfer the lease and dispose of the premises to a third party) can prove useful.
You may already know that there are standard terms. However, our input at the Heads of Terms stage, to try to limit landlords imposing cumbersome and unfair provisions, will prove vital.
English Law in relation to break clauses is riddled with traps, so our guidance at this stage can ensure you get the right break clause (allowing the flexibility you desire) rather than the wrong one (which imposes clunky and costly conditions and, if not exercised correctly, can leave a tenant locked into the lease for the remainder of its term).
Likewise, in relation to underletting, assignments and sharing occupation, our input at this early stage can ensure that the required level of flexibility is met and our clients are not barred or restricted from disposing of or underletting unwanted space.
Similarly, there is no point in acquiring a lease of a building unless you can make it yours – carrying out all necessary fitting out and other works throughout the duration of the lease in order to make the property suitable for your business and your requirements.
- Every penny counts
Another example of the importance of legal advice at the Heads of Terms stage is in relation to service charge and repair provisions. We like to inspect premises as it gives a much better feeling of what you are looking at to realise your aims. We also liaise with your surveyors who carry out a full structural survey of the premises to ensure that clients do not foot the bill for expensive repairs to aging buildings and the plant within it.
Service charge caps help, ensuring our clients can foresee their maximum service charge liability and do not pay over the odds.
The annual rent is, after all, only one of the many financial liabilities which a client is exposed to under a lease so our input can be vital in restricting service charge – or at least ensuring clients can forecast appropriately.
- Time poor and connectivity dependent
Support at the Heads of Terms stage will also prove useful around the quest for connectivity. Given the nature of the leisure and hospitality business, some clients have been shocked to learn how difficult it can be to establish internet connections within a building.
Wayleave agreements are notoriously time-consuming and cumbersome, so ensuring that connectivity is dealt with early and that landlords are obliged to assist at their own cost (and not at the cost of the tenant which is often the case) and in finalising wayleave agreements prior to the move-in date can be crucial.
We have seen a recent example where a tenant of a high-spec building had to agree with another nearby tenant to piggy-back off its Wi-Fi as the landlord and the service provider could not agree on the terms of the Wayleave Agreement and, when they finally did, the service provider couldn’t install the cabling for several months.
This could be disastrous for leisure and hospitality sector businesses.
We appreciate that connectivity is essential to most businesses but particularly leisure and hospitality companies, so legal input at the Heads of Terms stage can ensure that this issue is dealt with properly and at the right time.
So, what does this type of support cost?
We are committed to providing good value for money to all of our clients where legal fees are concerned. We can give clients some preliminary guidance at the Heads of Terms stage for no added cost.
If you are a prospective tenant looking to take commercial space, at whatever rent in whatever location, we would be happy to assist you in making the transition process as smooth and hassle-free as possible.
For further information on commercial leasing, please contact Mark Appleton on [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems, we recommend that professional advice be sought.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.