Before Allowing The Right One In……….
A Cautionary Note for Landlords of Commercial Premises
During the early stage of lease negotiations it can be tempting for landlords to allow prospective tenants into occupation of business premises in advance of the lease being settled. The tenant may wish to start preparing the premises or start trading in good time and the landlord may be pleased to start receiving rental income early.
However, before allowing the intended tenant across the threshold, landlords should take care to put in place a short-term tenancy agreement known as a ‘tenancy at will’ to reduce the risk of trouble later on.
A tenancy at will is a short form agreement which governs the terms of the occupancy and allows both parties a degree of flexibility. This is because it is ended by either party ‘at will’ and without notice – hence its name. A tenancy at will does not give the tenant security of tenure and while a tenant may see this as precarious, it can serve as an incentive for the tenant to work with the landlord to complete the fixed-term lease quickly.
It is important that a tenancy at will is correctly drafted. Careless drafting can result in it becoming a different sort of tenancy with potentially adverse consequences for the landlord. A solicitor should be able to prepare and submit this reasonably quickly after having carried out the necessary checks and where instructions are clear.
If the intended tenant takes occupation without a tenancy at will, in certain circumstances (and being more likely, for example, where the lease negotiations break down) the occupier may argue later on that they have acquired a periodic tenancy with statutory security of tenure. If so, this could result in costs and delays for the landlord in regaining possession of their premises or in otherwise resolving the dispute.
It is important that a tenancy at will is seen as a short term interim arrangement only and not allowed to endure for too long. If it does so there is, again, a further risk of a statutory periodic tenancy arising later on and which the landlord will wish to avoid. A landlord should seek their solicitor’s advice as to how long it is wise to leave the tenancy at will in place before needing to take suitable action.
Allowing a tenant to carry out work to the premises while a tenancy at will is in place is not normally advisable without appropriate precautions being taken. If a landlord chooses to allow this, they should seek their solicitor’s advice as to how best to manage this.