Business Law Advice Service
Case Study
I though I would only have to pay the rent….
I though I would only have to pay the rent….
In June 2000 Mr Smith entered into a five year lease of a commercial office suite in an office block at an annual rent of £45,000.00. At the time Mr Smith was told by the Landlord that this was a special discounted rental figure that would apply for the first year of the lease and then the rent would be increased to the market value.
Mr Smith did not want to miss out on this discounted rent so agreed to sign the standard lease issued by the Landlord. Mr Smith had not entered into a commercial lease before and thought that the rent would cover all of his costs for the office suite.
Mr Smith was shocked to receive a service charge demand a couple of weeks after taking occupation which confirmed that he was to pay an annual service charge to the Landlord of in excess of £4,000.00. He was also asked to contribute £600.00 towards the insurance premium for the whole building. These figures increased on an annual basis. The rental figure increased in year 2 to £60,000.00 per annum.
At the end of the five year term Mr Smith served the required notice to the Landlord to say that he would be vacating the office suite. Mr Smith duly left on the correct day.
A short time later Mr Smith received a Schedule of Dilapidations from the Landlord claiming a further £15,000.00 for works that were required to the office suite for decoration and removal of alterations that Mr Smith had carried out to the suite. Mr Smith couldn’t understand why all of these extra payments had to be paid.
What should Mr Smith have done?
He should have instructed a solicitor in 2000 to negotiate the terms of the lease to ensure that all provisions contained in the lease were fair and reasonable. The solicitor would also have summarised all of the potential costs and liabilities which Mr Smith would face during the term of the lease. If appropriate the solicitor would have advised Mr Smith to seek the advice of a chartered surveyor to ensure that the correct rental figures were being paid for the full five year term and to carry out a Schedule of Condition of the property. The solicitor could have potentially agreed a service charge cap and would have ensured that any dilapidations claim was just and reasonable.
At what cost?
A solicitor would charge in the region of £1,500.00 to £2,000.00 to undertake a commercial lease negotiation which could have produced a significant saving for Mr Smith in terms of service charge, annual rental figures and the dilapidations claim.
Mr Smith did not want to miss out on this discounted rent so agreed to sign the standard lease issued by the Landlord. Mr Smith had not entered into a commercial lease before and thought that the rent would cover all of his costs for the office suite.
Mr Smith was shocked to receive a service charge demand a couple of weeks after taking occupation which confirmed that he was to pay an annual service charge to the Landlord of in excess of £4,000.00. He was also asked to contribute £600.00 towards the insurance premium for the whole building. These figures increased on an annual basis. The rental figure increased in year 2 to £60,000.00 per annum.
At the end of the five year term Mr Smith served the required notice to the Landlord to say that he would be vacating the office suite. Mr Smith duly left on the correct day.
A short time later Mr Smith received a Schedule of Dilapidations from the Landlord claiming a further £15,000.00 for works that were required to the office suite for decoration and removal of alterations that Mr Smith had carried out to the suite. Mr Smith couldn’t understand why all of these extra payments had to be paid.
What should Mr Smith have done?
He should have instructed a solicitor in 2000 to negotiate the terms of the lease to ensure that all provisions contained in the lease were fair and reasonable. The solicitor would also have summarised all of the potential costs and liabilities which Mr Smith would face during the term of the lease. If appropriate the solicitor would have advised Mr Smith to seek the advice of a chartered surveyor to ensure that the correct rental figures were being paid for the full five year term and to carry out a Schedule of Condition of the property. The solicitor could have potentially agreed a service charge cap and would have ensured that any dilapidations claim was just and reasonable.
At what cost?
A solicitor would charge in the region of £1,500.00 to £2,000.00 to undertake a commercial lease negotiation which could have produced a significant saving for Mr Smith in terms of service charge, annual rental figures and the dilapidations claim.
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