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5 Things to consider at the end of your lease

Few businesses can operate without a physical presence, whether that’s in the form of office space or warehousing. From startups to scale-ups and fully fledged businesses, at some point in their life cycle, a business is going to require commercial premises, and with the average office lease length having dropped 34% in the past 4 years to a total of 34 months, lease expiries are becoming more and more frequent.

Moving home is stressful, but at least you don’t often need to factor in downtime or fit out. Vacating commercial property is different. There are several practical points to consider when vacating commercial premises, and planning ahead is a must. Here, we look at five important points to consider when approaching the end of your lease.

Under the Control of Asbestos Regulations 2012, landlords and tenants are under duties, among other things, to:

  • take reasonable steps to find out if there are asbestos-containing materials (ACMs) in the property;
  • make and keep up-to-date records of the location and condition of ACMs; and
  • prepare a plan to manage the risks posed by ACMs.

Asbestos was fully banned in 1999, so if the property was constructed after 2000, ACMs shouldn’t pose a problem. However, for buildings constructed prior to 2000, tenants will be committing a criminal offence if they don’t have an asbestos management plan in place.

Commercial leases require tenants to comply with legislation, so if a tenant is unable to hand over an asbestos management plan on expiry of the lease you may find a landlord looking to deduct the costs of commissioning a survey from any rent deposit.

Most commercial leases contain specific “yield up” provisions setting out how tenants must return the premises at lease expiry. Typical obligations require the tenant to remove:

  • all trade fixtures and fittings;
  • signage; and
  • alterations made during the term.

You must also ensure that any damage caused during reinstatement is made good to the landlord’s reasonable satisfaction. All this will need to be done before the expiry of the term, so it’s best to engage with landlords early to see whether there’s a chance you could leave any aspect of your fit out in the property and to ensure you have sufficient time to carry out any reinstatement.

If you fail to comply with your reinstatement obligations, a landlord may be able to bring a claim against you for the cost of putting the property into the state of repair it would’ve been in had you complied with the terms of your lease.

A dilapidations claim is essentially a court process and can result in the landlord recovering costs attributable to the management of the reinstatement work and, as there’s arguably a delay to the landlord getting new tenants into the premises, lost rent.

Claims take time and resource to see through so are best avoided if possible, which is why we advise tenants to engage with landlords well in advance of lease expiry and doing any necessary work yourself.

Reinstatement works may affect the energy consumption/efficiency of the premises, and tenants are required to:

  • obtain a new EPC; or
  • pay the landlord’s costs in obtaining an EPC.

Again, this is something you should have on your radar to avoid any last-minute requests or rent deposit deductions.

Finding a new space
Most commercial occupiers will be relocating from one space to another, so ensure you have sufficient time to locate, negotiate and fit out your new space. Straightforward transactions can typically take three months once they get into legals, and with fit-outs taking around 3-6 months, you should factor in around 12 months to secure your new space and minimise downtime.

If you are approaching your lease expiration and want to discuss your options, call the Real Estate team at Greenwoods Legal LLP.


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