Solicitor Sara Butt

Break Clauses in Leases – What do they do?

Break Clauses in Leases – What do they do?

In leases, break clauses serve as crucial provisions that provide flexibility for both landlords and tenants. These clauses allow either party to terminate the lease before the expiration of the fixed term, subject to certain conditions and notice requirements.

Break clauses are regulated by specific laws and have implications that both parties should carefully consider. This article aims to shed light on the key aspects of break clauses in leases, outlining their effects, considerations for landlords and tenants, and the importance of seeking legal advice when exercising them. Break clauses can be included in both residential and commercial leases, but this article will primarily focus on commercial leases.

What is a break clause?
A break clause is a contractual provision that grants one or both parties the right to terminate a lease prematurely. It acts as an escape route, allowing parties to exit a lease early, providing flexibility in an ever-changing business environment. It impacts all parties, so it is important that both landlords and tenants have an understanding of them. The points for each party to consider differ slightly in detail and are outlined below.

Conditions
Break clauses are typically subject to specific conditions, such as the payment of outstanding rent, compliance with repair obligations, or vacant possession.

Points for Landlords to Consider
For landlords, it is vital to carefully draft break clauses to ensure they protect their interests. Ambiguous or poorly worded clauses can lead to disputes and uncertainty. Seeking legal advice when drafting a break clause can help landlords avoid potential pitfalls.

Notice Periods
Break clauses usually require the serving of a notice by the party wishing to terminate the lease. The notice period can vary, but it is crucial for landlords to clearly specify the required length of notice in the lease agreement.

Points for Tenants to Consider
Tenants must thoroughly review the conditions associated with the break clause. These conditions may include obligations such as reinstatement of alterations, payment of outstanding sums, or compliance with repairing obligations. Failure to fulfil these conditions can lead to the break clause being invalidated, potentially leaving the tenant liable for rent and other costs.

Timing and Flexibility
Break clauses provide tenants with the opportunity to reassess their business needs and exit a lease if necessary. However, tenants should be cautious about the timing of exercising the break clause. It is essential to consider market conditions, relocation logistics, and the impact on the business before deciding to terminate the lease.

Notice Periods
Similar to landlords, tenants must carefully adhere to the notice requirements specified in the lease agreement. Failure to serve the notice within the specified timeframe could result in the continuation of the lease and the tenant will have to fulfil their obligations for the remaining term.

Seeking Legal Advice
Exercising a break clause can have significant implications for both landlords and tenants. Due to the complexity and potential risks involved, it is strongly recommended that clients seek professional legal advice before taking any action. An experienced solicitor with expertise in property law, such as myself, can review the lease, clarify obligations, and guide clients through the process, ensuring compliance with legal requirements and safeguarding their interests.

If you would like a free initial consultation with a member of the Property team simply click on the “Speak to Our Experts” button on this page, call us on 01244 356 789 or email info@cullimoredutton.co.uk

Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.

Solicitor Sara Butt

Is buying property at auction right for you?

Is buying property at auction right for you?

Buying property at auction can be a thrilling and potentially rewarding experience. However, it is important to be aware of the legal implications, rules and regulations, and possible risks involved in such a purchase. In this article, part two of a two-part auction series, we will explore the key considerations for anyone looking to buy property at an auction in the UK.

Understanding property auctions
Firstly, it is important to note that purchasing property at auction is a legally binding agreement. This means that once the hammer falls, the winning bidder is legally obliged to complete the purchase. Therefore, it is essential that you thoroughly research the property before making a bid. This should include a detailed inspection of the property, checking for issues or defects, and obtaining a copy of the legal pack.

What is the legal pack?
The legal pack will contain important information such as title deeds, searches, and any planning permission or building regulations that apply to the property. Instructing a solicitor or conveyancer to review the legal pack and provide you with their professional opinion on any potential issues or concerns is advisable.

Property law and auctions
It is also important to be aware of the UK’s rules and regulations surrounding property auctions. These will vary depending on the auctioneer and the type of auction being held. Typically, auctions are governed by the Auctioneers and Valuers Association (AVA) and the National Association of Valuers and Auctioneers (NAVA). These bodies set standards for auctioneers and provide guidance on best practices.

Property auction process
When attending an auction, arriving early and registering your interest with the auctioneer is essential. You will be required to provide proof of identity and, in most cases, a deposit in order to bid. The deposit is typically 10% of the purchase price and must be paid immediately if you are the winning bidder.

It is important to set a budget before attending the auction, and stick to it. Auctions can be fast-paced and emotionally charged, so getting carried away and overbidding is easy. Also, remember that there may be additional costs on top of the purchase price, such as legal fees, stamp duty, and auction fees.

Should I buy property at auction?
The main benefit of buying property at auction is the potential to secure a bargain. However, it is important to be aware that risks are also involved. For example, the property may have hidden defects or be subject to restrictions that could affect its value or your ability to use it as intended.

It is important to approach it with caution and fully understand the legal implications, rules and regulations, and any risks involved. By doing your research and seeking professional advice, you can increase your chances of a successful and stress-free purchase.

If you would like a free initial consultation with a member of the Property team simply click on the “Speak to Our Experts” button on this page, call us on 01244 356 789 or email info@cullimoredutton.co.uk

Click here for part one of our auction series: “Is selling property at auction right for you?” 

Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.

Solicitor Sara Butt

Is selling property at auction right for you?

Is selling property at auction right for you?

If you’re looking to sell property in the UK, you may have considered selling at auction. But is selling property at auction right for you? In this article, part one of a two-part auction series, we’ll explore the legal implications, rules and regulations, and important considerations when selling property at auction in the UK.

Property auction process
First, it’s important to understand the auction process. Auctions are typically held in a public venue or online and allow potential buyers to bid on the property. The highest bidder at the end of the auction is legally bound to purchase the property, provided the reserve price (the minimum price at which the property can be sold) is met.

What to know about selling property at auction
One of the biggest advantages of selling property at auction in this way is that it can be a quick and efficient process. Unlike traditional sales methods, which can take several months or even years, auctions are typically completed within a matter of weeks. Additionally, auctions can generate a lot of interest from potential buyers, leading to competitive bidding and potentially higher sale prices.

However, there are also potential disadvantages to selling property at auctions. For example, if the reserve price is not met, the property may not sell at all. Additionally, sellers may need to pay auction fees, which can vary depending on the auction house and the type of property being sold.

The legal side of selling property at auction
Before deciding whether to sell your property at auction, it’s important to consult with legal and financial professionals to fully understand the legal implications and costs involved. Here are some important legal considerations to keep in mind:

Contractual obligations
When you sell via an auction, you are entering into a legally binding contract with the highest bidder. It’s important to ensure that you have a clear understanding of your obligations and the buyer’s obligations under the contract.

Payment and completion
Once the auction is complete, the buyer is legally bound to pay the purchase price and complete the transaction within a set timeframe. It’s important to ensure that you have a clear understanding of these deadlines and any consequences for failure to comply.

Legal and financial advice
It can be a complex process, and it’s important to seek legal and financial advice to ensure that you are fully aware of your rights and obligations.

Rules and regulations
In addition to these legal considerations, there are several rules and regulations that govern property auctions in the UK. For example, auction houses are required to provide potential buyers with a buyer’s guide, which outlines the terms and conditions of the auction and any fees that may be charged.

Choosing an auction house
Finally, it’s important to choose the right auction house when selling your property. Look for an established auction house with a good reputation and experience selling properties similar to yours. Be sure to read reviews and ask for references before making a decision.

Selling property this way can be quick and efficient way, but it’s important to fully understand the legal implications, rules and regulations, and costs involved. Seek legal and financial advice, and choose the right auction house to ensure a successful sale.

If you would like a free initial consultation with a member of the Property team simply click on the “Speak to Our Experts” button on this page, call us on 01244 356 789 or email info@cullimoredutton.co.uk

Next week in part two of our auction series we ask: Is buying property at auction right for you?” 

Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.

Quick Guide: Buying residential property as an individual or as a company

Quick Guide: Buying residential property as an individual or as a company

Download our free Quick Guide: Buying residential property as an individual or as a company covering:

  • Property Searches
  • SDLT and LTT
  • Mortgage Availability
  • Solicitors fees

Click here to download your free quick guide

This Quick Guide looks at the differences between purchasing a residential property as an individual or as a company.

To download your free copy simply complete the form below:

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If you would like a free initial consultation with a member of the Property team simple click on the “Speak to Our Experts” button on this page, call us on 01244 356 789 or email info@cullimoredutton.co.uk

Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.

Solicitor Sara Butt

Commercial Property change of use – what’s the process?

In a perfect world, you would be able to convert a commercial property from one type of business to another without having to jump through too many hoops or get tangled up in too much red tape.

Unfortunately, though, this world is far from perfect, and a commercial property change of use can involve a surprising amount of paperwork.

Ensuring you comply with building regulations, going through the planning permission minefield, and understanding the various building use ‘classes’ is vital.

So if you’ve just taken ownership of a new commercial property that used to be a factory, and you want to change it into an ultra-trendy ‘industrial-themed’ restaurant, what do you need to do? Indeed, what extra factors should you consider before making the purchase?

Know your ABC
Under the planning system, many buildings (both commercial and residential) fall into various ‘classes’ and are given a code to signify their lawful use. These are known as ‘use classes’. These use classes have recently been reviewed and a new Class E introduced. Class E includes various Commercial, Business and Service uses [including the previously revoked Classes A1/2/3]. The B2 (General Industrial), B8 (Storage) or C3 (Dwelling houses/residential housing) classes remain. Some buildings such as casinos, public houses and pay day loan shops are defined as suis generis uses and do not fall within a specific use class.

Every building has a designation, and it is possible in many cases to change their classification, depending on what the original use was, what you want to change it to and in some cases how your local authority views the proposed change.

Why are use classes so important?
A use class can be used to determine whether or not you can change a building’s use without the need to apply for planning permission and learning how to navigate your way around the various classes could make turning a building that used to be a pub into a hotel or restaurant, for example, much easier.

However, some changes of use will still need permission, so you’ll need to know exactly what classification the building currently falls under, as this will help determine whether a change of use requires planning permission.

How do I find out what my building classification is?
You can find a full list of use classes on the government’s planning portal, but it may take a little bit of investigation to determine exactly which class a building falls into, especially if it has had a variety of uses over the years. You can then check your own records, including deeds, land registry records and other official documents to determine the current classification. You can also get more information from the Town and Country Planning (Use Classes) Order 1987 as amended, or contact your local council’s planning department, who may have records concerning the classification of your building.

What if the property was originally classified as residential?
If the building has a C3 (residential housing) classification, then getting it reclassified for commercial purposes may take some doing, especially if you’re right in the middle of a quiet domestic neighbourhood. You’ll need to check if the change of use requires planning permission. If so, go through the full process of applying to the planning department for permission for change of use. They could refuse this on the grounds of the impact it may have on your neighbours. Or they may find in your favour and allow you to change the use of the building, but with certain restrictions.

If your change of use is permitted under the Use Classes Order, then you will not need to make an application for prior approval or make a planning application. However, it’s important to do your homework thoroughly and don’t simply assume that your change of use is on the approved list. It can be very difficult to get retrospective planning permission for a change of use application, and if it’s declined then you would have to stop using the building for the new purpose which could be expensive, particularly if the local council were to bring enforcement proceedings. Be warned; most external building work associated with a change of use is also likely to require planning permission and therefore an application to your local planning authority.

If you have to put in a commercial property change of use application then it is likely to take at least 8 weeks for the planning permission process to go through, depending on the complexity of the project. Make sure you provide as much information as you can, and remember that the application will need to show that you’ve considered the potential impact on the local environment with regards to the increase in traffic or the requirement for public parking spaces and access for delivery vehicles. If you do need to go down this route then it’s essential that you talk to an expert in planning and property law, who will be able to take you through the process and help ensure every box is ticked to maximise the chances of your application being approved.

Is there anything else I need to think about?
Commercial Property change of use doesn’t just involve letting the local planning department know what you’re doing. You’ll need to consider other issues such as Building Regulations compliance. From fire doors to flame-retardant building materials, energy efficient lighting and public facilities, you’ll need to plan very carefully, especially if the public is going to be allowed access to your building.

If food preparation is part of the plan then hygiene will be a big factor. For example, if you’re turning a building that was previously residential into a public house then you’re going to need to install catering facilities that meet all current hygiene regulations.

You’ll also need to think about the type of building insurance you have, and a huge range of other considerations such as commercial waste management, any licences needed, business rates, and even how many toilets you have on-site to conform with Health & Safety requirements.

Make sure you’ve got a commercial property legal expert in your corner from the outset so things go as smoothly as possible.

For more information about our Commercial Property services, please contact a member of the Commercial Property team on 01244 356 789 or email info@cullimoredutton.co.uk

Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues.

Solicitor Sara Butt

Should you buy or rent a commercial property?

If you are looking to move your business, there is an important decision to be made around whether you should buy or rent commercial property.

There are several factors you should consider and making the right decision can be challenging.

In this article, we look at the pros and cons of each to give you an idea of what you may wish to think about or discuss with your legal adviser.

 

The pros and cons of buying a commercial property

Potential investment opportunity
Firstly, like with any property purchase, buying a commercial property could be seen as an investment. The property may increase in value, and when you own your business premises, you can profit from this increase instead of your landlord. You can also offset the interest paid on the mortgage against your net profits.

However, you will need a large deposit to secure the property – often around 20-30% of the purchase price – which may not be viable for smaller businesses. It is unlikely, but possible, that the property could decrease in value too, which could mean that you owe your lender more than the property is worth. Investing in property is always a risk, so you should consider carefully before deciding to buy.

Planning your business’s financial future 
Another key benefit is that you can plan better for your costs. With a commercial property, you may be able to fix your mortgage payments for up to ten years. However, when you rent commercial property, you may be subject to rent increases making it harder to create business projections. It can also make conducting business more difficult where you are operating on tight financial margins. A large rent increase could even make your operation or business no longer viable.

On the other hand, if you have a variable rate mortgage on the property, payments can rise by a significant amount, so this may not be as much of an advantage as you might think.

Option to sell 
Although you can fix your mortgage payments for a long period, you may find that your business premises need to change or are no longer fit for purpose. If you own your commercial property, you can sell whenever you want. However, if you are renting your commercial property, you may be tied into a lease that can be difficult if not impossible to bring to an end if there is no termination or break clause. Some commercial properties have lease terms of up to 15 years, which may not work for your business requirements.

Making necessary changes to the premises
When you own your commercial property, it allows you to make any changes to the property that you see fit. Making such changes can be crucial to business operations, and this freedom should be a key consideration when you are thinking about buying or renting a commercial property. You can also sub-let all or part of the building, which is often not possible when you are renting a commercial property.

You may, of course, be able to make changes if you rent a commercial property, but this will be subject to obtaining the landlord’s permission.

 

The pros and cons of renting a commercial property

For most, the biggest disadvantage of a rented commercial property is that paying rent will never offer a return. You won’t benefit from any increase in the commercial property’s value, and it can feel like money wasted. However, there are many benefits to renting a commercial property too.

Faster and more straightforward
Typically, the process of getting into a rented commercial property is much quicker and more straightforward. You can cut out the process of securing a mortgage and conveyancing, allowing you to relocate quickly.

No large deposit required
Similarly, you won’t need to save up a large deposit to rent a commercial property, making getting new commercial property easier for smaller businesses. If your business has good cash flow, you could end up renting a great space you could never afford to buy, boosting the image of your business.

Subject to lease conditions
There are of course disadvantages to renting, mainly that you will be subject to the conditions of your landlord. You may need to pay for repairs where you are on a ‘full repairing’ lease, and any changes you make could add value to your landlord’s commercial property at the expense of your business.

Speak to an advisor
Whether you choose to buy or rent a commercial property will depend on your specific needs and circumstances. You should seek advice from an experienced commercial property solicitor such as ourselves, we can explain your options to you.

For more information or to arrange free half hour consultation with a member of our Commercial Law team, please contact us on 01244 356 789 or email info@cullimoredutton.co.uk.

Please note: This is not legal advice; it is intended to provide information of general interest about current legal issues..