Commercial Leases: Limiting Tenant Liability

When you enter into a commercial lease as a tenant

, you will automatically take on a wide array of responsibilities, many of which you will be personally liable for.

Your obligations will be detailed within the terms and conditions of the lease itself, although some of the most obvious elements include the payment of rent, service charges and dilapidations. Other aspects may be a little less apparent, particularly to those who are new to the ins and outs of commercial property. For example, where there are two or more tenants operating as a sole trader or partnership, the individuals involved will be accountable for all those named on the agreement. This means a landlord can, technically, claim the rent in its entirety from just one individual tenant. This is known as tenants' joint a several liability.

How to limit your liability as a commercial tenant.

A commercial tenant is, therefore, exposed to a significant level of personal liability. Understandably you will want to reduce this as much as practicable, as you do not want to put your assets on the line if possible. To avoid this risk, you need to give careful consideration to the various ways in which you can restrict your personal liability as a commercial tenant. This may include:-

1. Understanding your liabilities.

Be completely certain of what your liabilities are. Only by understanding the precise terms of the lease will you be able to prepare yourself for the future.

2. Negotiating with the landlord.

Once you have got to grips with the terms of the lease, pinpoint anything you do not feel happy with. Negotiate with the landlord on these aspects and don't be afraid to take a strong stance. Remember, this is your personal liability at stake; you must ensure you have the maximum amount of protection possible.

3. Offering alternative solutions.

To appease your landlord, offer alternative solutions to the issue of personal responsibility. For example, suggest a three month rent deposit, or propose a time restriction on the length of personal liability.

4. Insurance.

Carry out throughout insurance checks. Make sure your landlord has comprehensive coverage, and also investigate the benefits of taking out your own insurance policy.

5. Legal advice.

Lastly but most importantly, instruct a solicitor from the outset. Having a professional who specialises in commercial leases on your side will be an invaluable asset. A solicitor will be able to negotiate on your behalf, identify any risks to your personal liability, and advise upon ways to minimise those risks. This could save you a considerable amount of money in the long-run.

Get Legal Assistance Today.

To talk to a legal expert about minimising your personal liability as a commercial tenant, contact specialised solicitors.

by: Richard Godden

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