Commercial landlords – essential information

RENT ARREARS
Not good news — These days £5,000 is the minimum figure for serving a statutory demand and for bankruptcy proceedings against an individual.

The previous figure was a much more reasonable £750 (which remains the minimum for service of such documents where the debtor is a company).

Effectively therefore most landlords will have to pursue in the County Court where the tenant is an individual and the debt is under £5,000. Time consuming, inconvenient and expensive.
N.B. Commercial Rent Arrears Recovery system is only available for recovery of rent, VAT and interest. It doesn’t cover service charges or any other items reserved by a lease and applies only to purely commercial lettings.

IS THE ANSWER RENT DEPOSITS?
A possible option for the landlord could be to insist on a rent deposit of at least £5,000 when dealing with a tenant who is an individual — but is that realistic in the case of a small letting?

When there is a request for consent to assign to an individual, is the answer to insist on a rent deposit of this size in return for consent being given?

The danger is that if no rent deposit is taken individual tenants may simply walk away from outstanding rent liabilities because the landlord does not want the expense and inconvenience of chasing in the County Courts for a small claim.

FORFEITURE OF A LEASE
A cautionary note
A landlord may well have the right to forfeit if a tenant is in breach of covenant.
If the landlord inadvertently commits an act which recognises the continued existence of the lease then he loses his right to forfeit.

An objective test applies, e.g.:

• Issuing and accepting rent for rent due in advance will be a waiver even if it’s done on a “without prejudice” basis.
• Unwittingly confirming the ongoing landlord and tenant relationship, e.g. by merely inspecting the premises or entering into discussions about the surrender of the lease or a possible consent to assign.

In the current market forfeiture is not a frequent occurrence but, in the case of a bad tenant where forfeiture might be required, or if the market picks up again, the above points should be borne in mind.

SCHEDULE OF CONDITION/REPAIR
You will be aware that it’s becoming more common in many commercial leases to see a provision such that “the tenant is not required to put the premises in any better state of repair or condition than they were at the start of the lease as evidenced by a schedule of condition annexed to the lease”.

Great for the tenant but not for the landlord. “No better” means no protection at all for the landlord.

The tenant can wreck the premises and they will be in “no better” condition. This clever wording is to be avoided.
If this clause must be included then you should make sure that the provision is to ensure that the premises are maintained in “no worse” condition than they were at the start of the lease.
Better still, more and more landlords are being advised to resist this and to require that if there is a specific defect then that should be identified and liability for that defect specifically excluded.
So if you are a landlord then the advice is to resist the more general clause if at all possible.

FORFEITURE – TENANT INSOLVENCY
All too frequent an occurrence these days.
Remember that the Insolvency Act 1986 provides that no legal process can be started without the Court’s permission if a tenant is in administration—more cost for the landlord.
Happily, recent decisions have made life easier. If forfeiture doesn’t impede the purpose of the administration then the landlord may well succeed in recovering the premises.

BUSINESS TENANCY OF FORMER AGRICULTURAL BUILDING
A letting for non-agricultural purposes of a building which was an agricultural building will not be a farm business tenancy but a conventional business tenancy under the Landlord and Tenant Act 1954—a much more acceptable situation for the landlord.

IMPORTANT

SCHEDULE OF IMPLEMENTATION OF ENERGY EFFICIENCY STANDARD
More potential expenditure for landlords, but don’t ignore it. Please read on.

As you will know, minimum energy efficiency standards have been introduced not only into the residential property sector but also into the commercial private property sector as well.
The key dates are as follows:

• April 2016 – from that date residential tenants are able to carry out prescribed energy efficiency improvements with the landlord’s consent, which must not be unreasonably withheld.
• April 2018 – from that date the regulations made it unlawful to grant new leases of residential or commercial property with an EPC (Energy Performance Certificate) rating of less than ‘E’.
• April 2020 –from this date this will extend to all residential leases; and
• April 2023 – the provisions will be extended to all commercial leases. This provision could cost the property sector a lot of money.

The number of properties which have an EPC rating of F or G in England and Wales is estimated at
2-300,000!

The advice is therefore to implement a programme of upgrades now, spread the cost possibly by service charges and not leave it all to the last minute.

We have many years of detailed experience in negotiating commercial leases, so do please contact us if you are considering taking on a new tenant. We can help you minimise the risks.

If you have any questions or require further advice, please contact:

David Hall, 01789 772955 / email@hallreynolds.co.uk

The information, materials and opinions contained on this website are for general information purposes only, are not intended to constitute specific legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. Hall Reynolds LLP does not accept any responsibility for any loss which may arise from reliance on information or materials published on this website

 

Commercial tenants – essential information

Your premises are or may become a key part of your business. As your business expands and takes on a new venture these are some of the key areas on which you should take legal advice before you commit yourself.

Heads of terms

It’s important to clarify and agree the main terms of the lease with the landlord before you are given a draft lease. Try to formulate a ‘Heads of Terms Agreement’. Although generally not legally binding, if carefully prepared, this will save time when negotiating the lease document.

The length of the lease and early termination

You should seek to ensure that the lease gives you some flexibility if you outgrow the premises or if you need to end the lease early. You could do this by:

– agreeing a shorter term

– negotiating a longer term with a break clause enabling you to end the lease part way through the term.

Transfer of the lease

You should have the right to transfer the lease to another tenant. Most landlords will require you to guarantee the new tenant’s obligation to pay the rent under the lease. If the new tenant defaults, the landlord could require you to:

– pay rent and other expenditure for the remainder of the lease.

– If the tenant is declared bankrupt or is wound up, take the lease back for the remainder of the term.

Similarly, you might seek to ensure that you can sublet the whole or part of the premises to give you more flexibility.

Rent

Try to agree an initial rent free period. This could be helpful if you are just starting out in business or need some time to fit-out the premises.

Rent is usually paid quarterly in advance, but this can sometimes cause cash flow difficulties. If so, ask if rent can be paid monthly in advance.

VAT

Many rents under commercial leases attract VAT. This may be a problem if you are not VAT registered and you cannot claim the VAT back.

Rent Reviews

In a longer lease of 3 to 5 years or more, the lease may allow the landlord to put the rent up part way through the term.

Reviews are usually “upwards only” but on rare occasion it is possible to negotiate a review in line with the market rental of comparable local premises which could result in a rent reduction.

Personal Guarantees and Rent Deposits

Some landlords seek personal guarantees from directors of tenant limited companies. This defeats the object of limited liability so avoid them unless you have no other option.

You could offer a rent deposit instead. These are often at least one quarter’s rent. The rent deposit should be held in a separate rent deposit account to protect the money in case the landlord goes bust!

Repair

This is very important provision. Almost all leases require the tenant to keep the rented property in good or even better repair. This can also have the effect of requiring you to put the property into repair. If the property is old and in a poor state of repair you could face a big repair bill because the lease will require you to hand back the property in accordance with its terms. Even new or recently refurbished properties can cause problems as they may come with “inherent defects” resulting from poor design or construction methods which may require repairs in the future.

A “photographic schedule” attached to the lease noting the state of repair of the property at the beginning of the lease will help to protect you. Dilapidations clauses for repairs at the end of the lease can be very expensive, and agreeing that you will not be required to put the property into any better state of repair than at the start of the lease as evidenced by the schedule will reduce that liability.

If you are leasing part of a building and are only responsible for part of the repairs, make sure that the landlord is required to repair parts of the building not covered under yours or any other lease. For example, you may not be required to repair the roof but you still need to be able to insist upon the landlord doing so.

Service Charge

A lease of part of a building or a of unit on an estate will often include a service charge to cover the landlords costs incurred in maintenance and repairs to the rest of the building, roads, common areas, cleaning, security and so on.

Check what proportion of the entire service charge will apply to the property you are leasing and how this is calculated to ensure it is fair. Try to negotiate a “cap” to the service charge so you are not faced with a large bill if the landlord needs to undertake substantial repairs to the building during your lease.

Security of Tenure

All commercial leases over 6 months in length are normally protected under the provisions of the Landlord and Tenant Act 1954 which provides that you will not automatically have to leave at the end of the lease unless the landlord serves a notice establishing one of a number of grounds.

The Act also allows you to ask the court to decide the rent under a new lease the landlord offers you if you cannot agree the same. The landlord can seek to exclude that protection but if the location of the premises or continuity of occupation is key to your business, it could be very important to have it in place.

Stamp Duty Land Tax

The longer the term of the lease and the higher the rent, the more likely you are to have to pay Stamp Duty Land Tax on the lease. It is worked out on the total rent paid during the term (plus any VAT)

Any amount over £150,000 (subject to a calculation to arrive at what is called a Net Present Value) will attract Stamp Duty at 1%.

Negotiate the most efficient length of term to avoid paying SDLT or seek to reduce the rent slightly if you are just over the threshold.

Registration of the lease at the Land Registry

If the term of the lease is over 7 years, it will have to be registered at the Land Registry with a properly prepared scale plan.

We have many years of detailed experience in negotiating commercial leases, so do please contact us if you are considering taking on a new lease or sublease, assigning an existing lease or taking on an assignment of an existing lease. We can help you minimise the risks.

If you have any questions or require further advice, please contact:

David Hall, 01789 772955 / email@hallreynolds.co.uk

 

The information, materials and opinions contained on this website are for general information purposes only, are not intended to constitute specific legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. Hall Reynolds LLP does not accept any responsibility for any loss which may arise from reliance on information or materials published on this website

Probate fees hike scrapped

Last November, the Government announced plans to alter the charging structure for probate fees which are paid when administering someone’s estate after they die. The proposal was that the current flat fee, now £215 (or £155 if applying through a solicitor) would be replaced with a sliding scale, meaning that some of our clients dealing with higher value estates would have been charged almost £6,000 extra!

The changes were due to come into force in April 2019 and have been linked to the surge in applications for grants of probate which has caused significant delays to the processing times. For now, probate fees will be reviewed as part of the annual assessment of charges in the family and civil courts.

Hall Reynolds LLP welcomes the withdrawal of the Probate Fees Order and we are relieved that our clients and estate beneficiaries, will not be burdened with unfair fees.

If you would like any help or advice regarding probate, writing or changing a will or powers of attorney, please get in touch.

Long delays for Grants of Probate

Unfortunately, we like all law firms are continuing to experience long delays with applications for Grants of Probate. In our experience applications are continuing to take at least eight to twelve weeks to be processed.

The probate registries have explained that these long delays have been caused by a combination of the large volumes of applications submitted ahead of the planned increases to the probate fees, a new online probate application process (which has come with various IT glitches), and finally, insufficient resources at the probate registries to deal with the backlogs.

HMCTS have advised that applications are being dealt with in date order.  They will not expedite applications considered by applicants to be “urgent” (e.g. if there is a property sale pending that is dependent on the grant). HMCTS have further advised that is not wise to telephone the probate registry to chase them – this will only slow them down further, and they will not expedite the application.

We are continuing to progress files where possible but we must advise that all Probate transactions are being affected and not individual matters.

Make a Will Week 2019

From 17th to 21st June 2019 we will be supporting The Air Ambulance Service  Make a Will Week initiative to help raise money for this life-saving charity. We have agreed to waive our fee for basic Will writing, or for amending an existing Will. In return for this service, you can make a donation to The Air Ambulance Service. A donation of £150 is recommended and you can also make a gift in your Will. If you would like to make an appointment please give us a call and mention “Air Ambulance Wills” to our receptionist.

Best Wills and Probate Lawyers 2019

We are delighted to announce that Hall Reynolds LLP won Best Wills and Probate Lawyers 2019 – Warwickshire in SME News Magazine UK Enterprise Awards.

The awards are given solely on merit and are awarded to commend those most deserving for their ingenuity and hard work, distinguishing them from their competitors and proving them worthy of recognition. As an independent awarding body, business size or reach are not the only deciding factors for our nominations. SME News focused more on the quality of dedication and innovation within the work done and in forming positive relations with clients.

Congratulations to our team!

Best Property Law Firm 2019

We are delighted to announce that Hall Reynolds LLP won Best Property Law Firm 2019  &  Recognised Leader In Residential Property Transactions – Warwickshire in SME News Magazine 2019 Legal Awards.

The awards are given solely on merit and are awarded to commend those most deserving for their ingenuity and hard work, distinguishing them from their competitors and proving them worthy of recognition. As an independent awarding body, business size or reach are not the only deciding factors for our nominations. SME News focused more on the quality of dedication and innovation within the work done and in forming positive relations with clients.

Congratulations to our team!

 

What to do when someone dies?

When a person dies, somebody has to deal with their estate, collecting in the money, property and possessions, paying any debts and then distributing the estate to those entitled to it.

The person who deals with the estate is called a personal representative. There is often more than one.

The term personal representative can either refer to an executor or an administrator.

  • If the deceased left a will appointing someone to the role, they are called an executor.
  • If there is no valid will, or if the will does not name an executor, then the personal representative is called an administrator.

The deceased person may have named a professional executor such, such as a solicitor. If not, the personal representatives can obtain advice from a solicitor on how to carry out their duties properly. Fees for this service are paid from the Deceased’s estate, rather than by the personal representatives themselves

How is the estate administered?

When it comes to the management of an estate, it is vitally important to make sure that everything is dealt with correctly, not least because the executors and administrators are held personally liable for errors.

The duties include:

  • Preparing inheritance tax returns
  • Obtaining the grant of representation (a grant of probate or letters of administration) from the Probate Registry
  • Preparing estate accounts
  • Distributing the estate in accordance with the will or the rules of intestacy
  • Setting up any trusts arising under the will or the intestacy rules
  • Post-death tax planning and the preparation of deeds of variation

In some cases, where the estate is very straightforward, or the executor has relevant experience and skills, it may be possible for the estate to be administered by the personal representative(s). But generally, estate administration is a task that’s undertaken by a solicitor.

Large or high-value estates with many and varied assets with family trusts and sizeable gifts can become extremely complicated.

A solicitor will complete the process on behalf of the personal representatives, dealing with all the necessary paperwork to obtain the grant and distribute the estate to the entitled beneficiaries, ensuring that everything is done correctly, and protecting the executor or administrator from liability.

For more information about what to do when someone dies, please get in touch.

 

 

The information, materials and opinions contained on this website are for general information purposes only, are not intended to constitute specific legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. Hall Reynolds LLP does not accept any responsibility for any loss which may arise from reliance on information or materials published on this website.

Why should you update your Will?

Official guidance recommends that people review their will every five years and after any major life changes, but a quarter of wills have not been updated for at least five years. If you have already prepared a will – how long ago was this prepared? Do you remember what your exact wishes were? While many people think that drawing up a will is a one-time task, this isn’t how estate-planning tools should be used. Life is unpredictable, and our relationships and preferences can change over time. If your will was written some years ago, it is crucial to inspect your copy and ensure its contents still reflect your wishes. If your will is not accurate or up to date it can be a real bone of contention and cause undue stress and worry for loved ones when you die- perhaps leaving them with not enough to cope financially or worse, nothing at all.

Particular events that should prompt you to seek professional legal advice about your will include the following:

Buying a property

Buying a property or increasing your assets is usually a good time to review your will and make sure it still reflects your wishes and that it deals with the new assets you have acquired.

Co-habitation

If you’re an unmarried couple holding the property as tenants in common, remember you would need to include your partner in your will otherwise they will not be entitled to your share of the property or of anything from your estate, which can cause a number of problems especially if children are involved.

Marriage

Marriage invalidates any previous wills you may have had in place so it’s a good time to review your circumstances and put a new will in place.

Separation

If you are separated but still married, the law will treat you as legally married and with no will (or updated will) in place your spouse will still inherit under the rules set out for inheritance regardless of the separation.

Divorce

Unlike marriage, divorce does not automatically invalidate a will, therefore you will need to review the content of your will (such as removing your ex-spouse). Your ex-spouse will be treated in the reading of the will as if they had died before you and may not benefit or act in anyway stipulated but it is always best to update your will, in case a claim is made against your estate.

New Children or Grandchildren

In your Will you can, of course, leave assets to your children and should anything happen to you before they reach the age of 18 or at the age you specify these assets would automatically be held in trust, but just as important is you can appoint guardians for your children should the worse happen. Having new grandchildren is also a good time to review your will if you would like to leave something for them.

Looking for some guidance?

Here at Hall Reynolds LLP we will consider your individual circumstances and offer practical, straightforward legal advice, ensuring your wishes are reflected in your will. To find out more about updating or changing your will, please do not hesitate to get in touch.

 

 

The information, materials and opinions contained on this website are for general information purposes only, are not intended to constitute specific legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. Hall Reynolds LLP does not accept any responsibility for any loss which may arise from reliance on information or materials published on this website.

The benefits of training at a small law firm

As a Law Graduate, competition for Training Contracts is extremely intense, with many favouring applying for larger national and international firms as they seek the city lifestyle filled with coffees to go, hectic commutes and high rise heaven. Many are led by ambition and the belief that it will fulfil all of their career desires and as such, they follow these bright city lights.

However, these same career aspirations can be achieved in a smaller firm and this article will endeavour to highlight why smaller firms should not be overlooked when Graduates are considering Training Contracts and why many more should consider the option of a smaller working environment.

It seems to be common opinion that in a larger firm there will be greater opportunities to experience a wider variety of legal avenues. Yet, this is not entirely true as the variety which you can hope to experience is actually greater in a smaller law firm. Many Solicitors in smaller law firms will have expertise in numerous areas of Law as opposed to specialising in one area as would be expected in a larger law firm. Therefore, this allows those Solicitors to engage in a greater variety of Law which encourages a greater breadth of knowledge.

Furthermore, trainees within a smaller law firm could expect to gain more ‘hands-on’ experience. Within a smaller law firm, there are often more opportunities to practice the work carried out. Due to fewer staff, the work carried out by Trainees is often more valued and beneficial to the firm. As such vital skills and expertise can be learnt along the way and often at a faster pace due to the opportunities which are given.

The work-life balance is a topic discussed at length by aspiring and ambitious trainee Solicitors and often in larger firms this balance is rarely struck. Whereas, in a smaller law firm the balance is much more achievable as the work schedule is often more flexible. This is largely due to the greater sense of camaraderie and teamwork within a smaller law firm in times of emergency and on a daily basis which lessens the need for individuals to sacrifice their time out of the office.

Therefore, the time is coming whereby smaller law firms should be more widely considered. In this age of high competition and growing aspirations, smaller law firms can offer the same vital training and career prospects as that of a larger firm. With the same opportunities for progression, the chance of a greater variety of legal experience and a more flexible work schedule it is time that more smaller law firms are considered by trainee Solicitors.

written by Mel Yates – Birmingham University final year Law student