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Lease Advisory & Due Diligence

Cheapside, EC2

These days leases should be a ‘live’ issue throughout the term for the client and their surveyor, not least because circumstances and legislation are ever changing. Leases are often getting longer and more complex thanks largely to the computer and the ever increasing burden of regulation – from 20 pages or less in the 1970’s to sometimes over 60 pages today. Once ‘Green issues’ are fully incorporated or attached as an annex, we will probably be pushing 100 pages ! In covering every possible occurrence this has led to over complication, to the point where interacting clauses in a lease are difficult to follow, interpret and understand. As leases dictate liability and value to the point where landlords or tenants can benefit or suffer from the detail, sometimes with severe financial consequences, these days you need to be ever more vigilant. Clauses relating to rent review, break clauses and repairing liability are at the tip of the iceberg. So, we are always poring over existing leases, studying the legalise and assessing the current and future implications with a pro-active approach. These might translate into savings or value and help decisions on timing of disposal, extension and future planning. Depending on market circumstances, especially when coinciding with a rent review, there may be opportunities for lease restructuring including rent adjustment and other clause changes.

On the acquisition of a lease or freehold of a commercial property, we aim to provide a high standard of normal due diligence and this is set out in our Scope of Services as part of our Agency Terms of Engagement. At the crucial time after Heads of Terms are negotiated and before contracts are exchanged, we are still fully involved with advising the client and liaising with their solicitor which may also lead to improved final terms.

However these crucial due diligence services are often overlooked on the acquisition of another business or on a merger, where reliance is firmly on a solicitor. Who is assessing the value or liability of the lease or freehold and are these transparent and up to date or too reliant on the view of the business being acquired? Are these perhaps more or less significant than might be perceived? What impact might we, as surveyors, have on the price of the business? We can act in the background which might favour negotiations. This service would of course also apply to a business readying themselves for sale. What enhanced business price for a cleaner lease or improved property value?