As solicitors, we come across many strange terms, and none is more depictive than the phrase 'a fag packet Lease' often used in the business property world. This describes an understanding between a landlord and a tenant when terms have been agreed on a handshake, maybe over a pint in the local hostelry. Both sides agree not to worry about drawing up formal legal documents, as only the lawyers will benefit rendering the landlord or the tenant penniless!

However, this ‘fag packet’ should come with a severe wealth warning as such a path is festooned with hidden traps for both landlord and tenant. The consequences of not consulting a commercial property lawyer can potentially be disastrous, especially for the tenant, and there are some classic examples.

For example, if a lease states that the premises must be kept in 'good and substantial repair and condition', it actually means the property could have to be put in a state of good repair the day after completion of the Lease even if the condition of the property was poor at the time of signing. This is not hypothetical, as we were involved in an actual case where a landlord served a notice on the tenant two days after completion of the lease asking him to carry out hundreds of pounds worth of repair. The fact that the state of the premises was very poor at the time of completion of the lease was totally irrelevant, and the unfortunate tenant had to comply at considerable expense!

Similarly the terms at the end of the lease period needs to be clear. If the tenant has spent several years building a profitable business, unless the lease is correctly drafted, the tenant could be removed by the landlord, having a dramatic effect on the smooth running of the business with major financial consequences.

When a lease runs for more than five years, it is likely that the Landlord will want to have a rent review after say three years. These are usually very complicated clauses and expert help should be obtained from your Solicitor. In certain cases it may even be worth referring the lease to a qualified surveyor to check and ensure all is well.

There have been recent changes in legislation regarding leases. Some commercial leases that have not been stamped by the Inland Revenue within 28 days from the date of completion will now incur their wrath in the form of a £100 penalty plus interest. Longer leases may require registration with the Land Registry, and failure to comply could actually invalidate the Lease!

If you are planning to take on commercial premises and want to avoid one of the many pitfalls into which the unwary tenants can plummet, seek guidance from a solicitor experienced in commercial law. It not only makes sense, but could save you a fortune!

If you would like more advice on commercial or other property matters contact Stephen Frith at Motley & Hope Solicitors in Biggleswade. Contact Stephen on 01767 600600 or e-mail stephenfrith@motleyandhope.co.uk.