Mixed use property lease: shop or commercial unit with residential space
This is a comprehensive lease for letting a mixed use unit comprising of retail and residential space. The retail space could be used for any purpose, including as a shop, a restaurant, a cafe or for services.
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About this document
This lease should be used to let a commercial property that also includes space that will be used for residential purposes by the tenant. The most common example would be a shop with a flat above.
The tenant could use the commercial space for any purpose including:
- conventional retail of goods such as a newsagents
- as a restaurant or cafe
- as a walk-in premises for household services such as hairdressing or driving lessons
The unit may or may not have additional space used by the tenant for other business purposes, such as offices, storage or a commercial kitchen.
The lease provides for the residential space to be part of the business letting, regulated by the Landlord and Tenant Act 1954 and not the Housing Act 1988. The agreement includes an extensive menu of tenants' covenants to protect every aspect of the landlord’s interest.
Paragraphs relating to a full recovery of a service charge allow this lease to be used for a shop that forms part of a parade owned by the same landlord and that shares common services with other units in the parade. However, the document could be amended to remove these clauses if the property is not neighboured by others belonging to the same landlord.
We assume that the landlord is an experienced property developer or investor and as such have drawn the document to maximise the capital value of the let property and to provide acceptable security to a lender.
We offer two similar documents for shops where the tenant does not live at the property. Use our stand-alone retail unit lease if the shop does not share services or facilities with other neighbouring shops owned by the same landlord, or our lease for a retail unit in a parade if you require a provision for service charge recovery.
Plain English is used throughout except where it is necessary to use legal terms common in this field of law.
The key features of this lease can be summarised as:
- term between 1 and 30 years
- the residential space attached to the commercial unit is let to the same tenant
- service charge provision
- assignment and sub-letting options
- break provision
- rent review options
- opt-out of Sections 24-28 of the LTA 1954
- draft authorised guarantee agreement: enables you to use the opt-out provisions of the 1995 Act
- template for a security deposit agreement
This document is one of a collection designed for use by property professionals. Accordingly, the provisions are very thorough.
If you do not need some of these features, you may wish to look at the standard version for a shop with residential space. It contains fewer of the technical provisions, fewer landlord's warranties, and less detailed and extensive service charge provisions.
Within the extensive guidance notes to this document, we have provided a discussion on use of security deposit agreement and a template for one.
We have also included the forms required to exclude security of tenure. These include the prescribed notices to be given to the tenant 14 days before the new lease is created, a declaration of a new lease, and the statutory declaration if less than 14 days notice is given.
The law in this document
Commercial lease law is regulated primarily by the LTA 1954, amended many times. Account has also been taken of:
- the Landlord and Tenant (Covenants) Act 1995
- the Regulatory Reform Regulations 2003
- the Joint Committee's Code for Leasing Business Premises
- the RICS' Code on Service Charges
This is a comprehensive document, providing alternative choices for important decisions.
The contents include 31 provisions and 4 schedules covering:
- rent: amount, other payments, interest on overdue rent, periodic review
- condition and repair
- alterations with landlord's consent
- tenant's positive obligations
- tenant's obligations for the residential space
- responsibility for others
- restrictions on tenant
- goods deliveries and vehicle management
- preconditions for further development
- indemnities by the tenant and warranties by the landlord
- land registration
- security deposit
- access for landlord
- termination: default notice by landlord; provision for premature termination
- security of tenure excluded
- Schedule 1: service charge
- Schedule 2: rights reserved
- Schedule 3: draft authorised guarantee agreement
- Schedule 4: security deposit agreement
- Prescribed notices to be sent to tenant to exclude security of tenure
If the term is for more than seven years, it must be registered with the Land Registry and you will need to use these prescribed lease clauses to summarise the key contractual matters within the document. There is no need to use these if your intended term is seven years or shorter.
This document was written by a solicitor for Net Lawman. It complies with current English law.
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By Michael Tighe 01 June 2013
Seems to cover most issues and good guidance notes.
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Useful and appropriate.
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