Managing your lease - a good practice guide
Many GPs either occupy their premises under a lease or let parts of their premises to third parties but healthcare clients are often surprised about what their lease actually means.
Many questions can actually be answered by being familiar with, and understanding the wording within your lease. Here we answer some FAQs on leases.
Please can you just put a standard lease in place?
We regularly receive instructions asking us to prepare a 'standard' lease, but there is no such thing! Whilst there are a number of standard forms which provide a starting point for the lease terms (for example, the Welsh exemplar lease, the BMA template lease and several investors have their own base leases), each lease has to be drafted based on the requirements of the property and the commercial terms agreed between the parties.
A lease is a contract between the landlord and the tenant, and each contract can say very different things. That is why it is very important to read your lease and to check exactly what it says on each point.
Before entering into a lease, it is vital to read it through carefully, together with any report prepared by your solicitor, to ensure it does exactly what you think it does. If you have any questions about the practical implications, make sure to raise these with your solicitor before the lease is completed.
Who is responsible for repair?
This varies hugely depending on the wording of the lease itself. Common broad repair arrangements include:
- FRI (Full repair and insuring) - the tenant is responsible for the costs of all repair to the premises, both internal and external, and for the cost of insuring the premises.
- IRI (Internal repair and insuring) - the tenant is responsible for the costs of repairing the internal parts of the premises, and for the cost of insuring the premises. The landlord is responsible for the costs of maintaining the external and structural parts of the premises.
- TIR (Tenant internal repair) - the tenant is responsible for the costs of repairing the internal parts of the premises. The landlord is responsible for the costs of maintaining the external and structural parts of the premises, and for the cost of insurance.
- Schedule of condition - sometimes the tenant's repair obligations may be restricted to keeping premises in the same state as shown in a schedule of condition. However, if anything deteriorates beyond what is shown in the schedule, the tenant would usually have to repair it to good condition or replace it, rather than simply putting it back into its previous state.
The phrases above may not be used in the lease, and it is important to read through the repair provisions in detail. For example, it is likely that the tenant may be required to replace the boiler at the end of its life - even if it is in a poor condition at the start of the lease. Equally, there may be specific arrangements to exclude certain items from the tenant's responsibility, such as the lift or air conditioning.
You should ensure that you have adequate reserves to cover the ongoing cost of any repair liabilities in your lease.
Do I need a new lease when the tenants change or the landlord sells their interest?
Depending on anything else specifically noted in the lease, most leases can be assigned (ie transferred) to new tenants when there are changes in circumstances. This means that the new tenants take on all of the same liabilities as the original tenants.
When the landlord sells their interest, the lease remains in place, and the new owner automatically becomes the landlord without the need for a new lease between them.
Although the original document will still be in the names of the original landlord and tenant, the rights and liabilities can be passed to new parties. It is important to take legal advice when a lease is assigned to ensure that all of the necessary processes have been followed, including where you are a landlord who has received notice from your tenant that they intend to assign their lease.
I am a landlord and would really like to take the space back - can I do that?
A lease is a contract with a fixed term. Sometimes there may be a break clause which allows a landlord to terminate early - provided they have followed the necessary procedures within the required timescales as stated in the lease. If the tenant has been in breach of the lease, the landlord may also be able to terminate early in some circumstances. Usually though, the tenant would have the right to remain in the premises for the rest of the lease term, even if the landlord would prefer to have the space back.
You can always try and negotiate something different with the tenant - for example, agreeing to terminate the lease early in return for a payment made by the landlord. However, unless there is anything specific in the lease, the tenant would not be obliged to cooperate.
Should I sign this notice?
When the tenant wishes to do something in connection with their lease or their premises (such as assigning the lease, or carrying out some works) the terms of the lease often require them to obtain the landlord's prior consent. You may therefore receive notices relating to these matters.
Whenever you receive a notice, you should take legal advice as soon as possible. Usually it is incumbent on the landlord not to unreasonably withhold or delay their consent, but there may also be enquiries to be made about the tenant's proposal. We always strongly advise against signing any notices provided until you have discussed with your solicitor. It is standard practice for the tenant to pay the landlord's costs of any such application.
Are there any outstanding arrears?
It can be very easy to lose track of how much a tenant should be paying. The initial rent is easy to keep an eye on, but often there are rent review dates during the course of the lease which may not have been exercised. Similarly, the tenant may be required to reimburse insurance costs, or pay a service charge.
You should regularly review the financial obligations under any lease, to ensure that all payments have been accounted for, and all rent has been reviewed as provided for in the lease. If you do not keep track of this, you could be missing out on tens - or even hundreds - of thousands of pounds.