Moving on? Out with the old lease and in with the new

1 September, 2018

For many food businesses, the first premises they choose will not be their last and the need for more (or less) space could mean it’s time to move on. Emily Wright of law firm Cripps considers what business owners need to be aware of when taking that next step.

Leaving leased premises can be a complicated affair for any business, especially for a food producer needing to focus on perishables and equipment. As important as these elements are, it’s vital you don’t overlook your lease if you’re to avoid the risk of financial penalties.

Assuming it’s not simply a case of the lease expiring, a business tenant will have to either sell on (assign) the lease to a new tenant (the landlord will need to consent), operate a break clause abiding by any notice periods and/or conditions, or get the landlord to agree to take the lease back (surrender). Break clauses are interpreted strictly, so the slightest breach could prevent the lease from ending; where vacant possession is a condition, even leaving something minor behind could be enough to derail it.

All leases will contain clauses setting out how the property is to be left. It’s common for there to be a requirement to redecorate in the last six months of the term, and – unless there was a specific agreement otherwise – the landlord will be expecting it to be in good repair.

There will also be provisions governing whether any alterations made during the term need to be removed, and even if there is discretion on the landlord’s part as to what can stay, there may not be a requirement on them to notify you. A dialogue should be opened in good time so everyone is clear what is expected, especially if there’s a risk of confusion with regards ownership of any fixtures and fittings, the loss of which may impact on your business.

Even once the tenant has left, if the landlord doesn’t consider the property up to standard they can serve a schedule of dilapidations requiring you to do specified works, or pay the cost of them.

Out of the old, into the new

Once you have finally got shot of the old place, what about the new one? Continuity of trade has to be the primary concern, so starting the negotiations and legals in good time is a must to minimise the move’s impact on food production.

If there is likely to be an overlap, an agreement for lease could be used to give certainty that new premises will be available on a particular date, while avoiding having two leases (and two rents) for the same period. Lining up fit out contractors and having all the information ready for a landlord to approve is also important for getting things up and running promptly. And of course, ensuring any new lease is as flexible as possible should make things easier when it’s time to take the next step.

Emily Wright is a senior associate at Cripps, find out more by calling 01892 506340 or by email emily.wright@cripps.co.uk.

This article first appeared in Out of Home magazine in September 2018.