Small Shop – simple contract?

Small Shop – simple contract?

10:31 AM, 27th July 2021, About 2 years ago 6

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I am drawing up a contract for a tenant who wants to rent a tiny shop. One door and one single space equating to an RV rentable value of £1,650.

An initial 6-month contract rolling (like an AST) thereafter. Tenant and LL to give a months notice if required. Electricity by meter to be billed to tenant. No gas, no water.

1. Do I need to ask her to pay towards the building insurance separately, or just class that as in with the rent? I have already stated she would be responsible for the glass windows and of course insurance of her own stock. What if the shop gets broken into, though? Do I claim off my insurance for damage done to the door (for example) and cross charge her for the excess or does she have to apply via my insurance as the tenant (so its all done between themselves?)

2. She has a guarantor for the rent and deposit (she works P/T elsewhere). What info do I need of the guarantor and is it worth even bothering with a guarantor – I understand a Landlord can just change the locks on a shop if the tenant stops paying rent (if the LTA is opted out of).

Any other advice?

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9:41 AM, 28th July 2021, About 2 years ago

The tenant would need their own business insurance and whether they insure their stock is entirely up to them.
If the tenant is contributing towards the buildings insurance, then in your hypothetical case of the break in, you would claim from the buildings insurance for the door (and or the windows, if also damaged). Your tenancy agreement should stipulate what should be done about the excess.
I leased an office and we had a burglary where an internal door and external door were damaged. The landlord rather than claiming on the insurance, simply got his staff to do a botched repair on the internal door but not the external door. It took some persuasion to get him to do the job properly.


9:52 AM, 28th July 2021, About 2 years ago

Perhaps easier to give the tenant a FRI lease - plenty available for download

Simon M

11:22 AM, 28th July 2021, About 2 years ago

My father owned a shop which he let on a lease for 40 years. I understand where the tenant is the sole occupant of the building, it's normal for the tenant to take a repairing lease and that includes responsibility for damage etc., and they return the property in the same or better condition at the end. The tenant normally insures the premises - my father had the tenant liable for the cost, bought the insurance himself then invoiced separately from rent. The only disadvantage I remember was the tenant ignored obligations written into the insurance policy e.g. for electrical certifications.

After he lost 1-2 years' rent + court costs etc. with an earlier tenant, he then insisted on a guarantor - ideally a relation with a property.

John P

12:51 PM, 28th July 2021, About 2 years ago

Be very careful. The legal framework for commercial letting is completely different from residential letting through an AST.

For example, the law gives the tenant security of tenure, so that at the end of the fixed term, a tenant in commercial property has a legal right to renew the lease whether the landlord likes it or not. To regain possession, the landlord may have to pay compensation.

This is governed by the Landlord and Tenant Act 1954 and you can't just insert a clause in the lease to opt out of the security of tenure terms. To opt out, you must either issue a specifically worded declaration to the tenant at least 14 days before the date of the lease or the tenant has to take legal advice from a solicitor or commissioner for oaths and sign a 'statutory declaration'.

An alternative to a commecial lease is a Licence to Occupy. This is much simpler and may be more appropriate for a short term, arrangement. It is not bound by the Act, but if you use this routeit is important to make sure you don't inadvertantly create a lease.

I'd suggest that this forum is not a good place to get legal advice on something like this.

Freda Blogs

13:42 PM, 28th July 2021, About 2 years ago

John P is partly right re security of tenure, but nowadays it tends to be specifically excluded - the point being if it isn’t excluded it is implicitly included (and a bear trap for the unwary).

Commercial property leases are very different from residential, and without proper attention to salient details such as security of tenure, repairing liabilities, service charges etc, any saving in professional fees now could come back to bite you later with much greater fees/problems if you get yourself into a pickle for not having taken proper advice.

I also note that you refer to 'an RV rentable value of £1,650.' Do you mean RV (rateable value) or rental value - different things. Have you had the shop valued for rental purposes (preferably by a commercial property valuer, who could also advise on the essential lease terms).

I think it would pay you to do that.


21:33 PM, 31st July 2021, About 2 years ago

The Law Society Business Lease is the way to go. If you want it back at the end of the period, you would need to contract it out of the act ( L&T 1954 as amended) If you give them a clear 14-days notice of this - in writing- all they would need to do is sign a simple declaration - see L&T 35, 35a/1 and 35a/2.
It's a simple process, but as you're new to this I would strongly advise that you get a solicitor to deal with this on your behalf.

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