Keeping it legal

Nov 7 2006 By Libbie Henderson And Peter Duncan, The Journal

As the needs of your business change, you could consider letting part of your premises. This may be a more efficient way to use them and may generate a rent to set off your business expenses.

But, before seeking a tenant, you should consider what is required and what this may mean for you.

Firstly, which part do you intend to let? Is access to the leased part via the retained premises? If so, do you want the tenant to be a key holder and have the responsibility of locking up and setting the alarm? Can you make the area self-contained? The ideal situation would be to let a self- contained unit with separate access and metered water supplies.

Draw up a plan of the area to let to help you consider issues of access and shared areas. It's likely the tenant will need to register the lease or the rights granted at the Land Registry, so the plan must accurately meet the Land Registry's criteria.

Secondly, consider to what extent, and for what purposes, you require access to the let part.

If you do not expressly state the circumstances under which access is allowed, you'll have no right to enter the area once the lease is granted.

Thirdly, do you need consent from any third parties before letting? If the building is mortgaged, you will need consent of the lender. If you lease the building, does the lease permit sub-letting? Even if it does, you're likely to need a landlord's permission and conditions will be attached. Is a change of use necessary? If so, planning permission may be needed.

Finally, how do you protect your business interests? Limiting a tenant's use may prevent him from competing or running a business that is detrimental to the building's image.

Preventing or limiting him from assigning or sub-letting can also be a useful means of maintaining control.

You can include provisions to limit the tenant's right to extend the lease at the term-end and you should insist on reinstatement at the end of it if the tenant is to carry out alterations.

But beware of being too protective of your interests as it may make the premises less attractive to tenants and it may become difficult to let.

These are just a few of the factors that require careful consideration before leasing part of your premises. Taking advice and dealing with issues at an early stage will save time and money and may also prevent a great deal of inconvenience later.

Libbie Henderson is a property associate and Peter Duncan is a trainee solicitor in the company and commercial department of Dickinson Dees law firm.