tenant permitted use
Landlords under a commercial lease will want to retain control over the use their tenants make of the property. The level of control landlords like to retain is likely to vary from a high level in the case of a retail unit in a shopping centre to low in the case of most industrial premises.
Tenants need to take care when negotiating the permitted use of commercial lease premises, particularly on the following points:
- tenants should anticipate all of the uses they require to make of the premises. If they have any future plans to use the premises for a particular use, they should ask the landlords to agree to this use at the outset rather then incur the cost of needing to apply for landlords’ consent to a change of use.
- tenants need to remember that, as well as securing landlord consent to their proposed use, they may also need to obtain planning consent to the proposed use. Tenants should speak to their solicitor for advice in this area.
- sometimes, landlords do not just permit tenants to use premises for a particular purpose but specifically require them to do so. As an example, this means that a tenant is not just allowed to trade from a shop but must do so. Most tenants should try and avoid such positive obligations, as it will be very costly to have to run a loss-making business from leased premises, even where the rent is being paid.
- where tenants intend to enter into a lease of a retail unit in a shopping centre or park, they will probably want the landlords to agree not to rent out another retail unit in the same centre/park for a very similar use. They should ask the landlords to enter into a suitable legal undertaking.
Tenants should take advice from experienced commercial property solicitors on the exact wording of a use restriction clause in a commercial lease.