BGBG

New Lease or Second Hand Lease

Are you considering taking a commercial lease? Have you considered whether you should be taking a new lease or a second hand lease?

Are you considering taking a commercial lease? Have you considered whether you should be taking a new lease or a second hand lease?

Taking a new lease is like buying a new car: you can either have a bright shiny new one that has been lovingly tailored (in theory at least!) to your requirements or you can buy a second hand one with all the baggage that comes with it.

The advantages and disadvantages of taking a new lease

A new lease is one that is granted direct to you by the landlord.  Its advantage is that you should be able to have some impact on the terms that it contains by negotiating them directly with the landlord (although in practice most landlords have a standard form of lease that they are not willing to change very much).

The main disadvantage of taking a new lease is that you cannot usually just end the lease when you no longer need the property.  You will have to dispose of it either by transferring the lease or granting a sub-lease of it.  Either of these will involve you incurring costs including those of your landlord in agreeing anything you propose to him.  While landlords have to act reasonably, this does not always mean that they will in practice and making them do so can be difficult unless you want to spend a lot of time and money enforcing their compliance through the courts.

For more information on taking a new or second hand lease...

Please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 for a free discussion or email natalie.hopkins@everymanlegal.com

The advantages and disadvantages of taking a second hand lease (assignment)

A second hand lease is one where you take a transfer of a lease that is already in existence from the current tenant (the lease is ‘assigned’ to you).  Although there may be some room for negotiation with the landlord, in general the terms of the lease cannot be changed.  The other disadvantages of assignment include:

  • The landlord will probably have to agree to the assignment of the lease to you and someone (usually the existing tenant) will have to pay the landlord’s costs of doing so.
  • When the lease comes to an end, you will be liable for any breaches of the lease, even those which predate your ownership.

Whilst this may seem like more risk than it is worth this may be the only way to secure premises on locations such as High Streets where existing leases are already in place and competition for the premises is high.

What about taking a sub-lease? Is that a good alternative?

A hybrid situation involves you taking a sub-lease of the existing tenant’s own lease.  This is especially necessary if you are only taking over part of an existing lease but can be used in other circumstances as well.  In many ways, this is the worst of both worlds: you are subject to all the terms in the existing lease as well as all the new terms in the sub-lease.  Ensuring the two forms of lease work together and make sense can also be complicated.

However, if the existing lease has an unexpired term that is too long for you to commit to by way of an assignment, a sub-lease may let you “test the water” by renting your desired premises for a shorter period of time than may be left on the existing lease. In addition, if the existing tenant wants to remain in occupation of part of the premises a sub-let of part to you may be the only way you can proceed.

In all cases, you must be sure that the terms of your lease are clear and allow you to use the property for the business you intend and make it as easy as possible to end the lease should you need to do so.  It is vital that wherever possible you agree Heads of Terms in advance and take legal advice on these in order to establish the key terms.  If an existing lease does not meet your requirements and cannot be changed, you should think very carefully before taking the lease as breaching lease terms can be very costly.

Our dedicated team of solicitors, based in Witney, Oxfordshire, would be happy to answer your questions.

Contact Us

I was very impressed with the team. Everything was dealt with promptly. I felt completely safe in their hands, every detail that I needed to be aware of was explained clearly