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If you are a landlord or a tenant and require our assistance in relation to an agreement for lease, please call our commercial property solicitors on:
An agreement for lease is a contract between respective parties where the terms of the future lease have been agreed upon, but completion will not occur immediately.
The agreement places a binding obligation on parties to enter into the lease either on a fixed date (an unconditional contract) or once all conditions of the agreement have been met (a conditional contract).
Primarily, it provides certainty for both a landlord and tenant that a lease will be entered into.
Circumstances where an agreement for lease may be necessary:
If works are being carried out on the property before the tenant takes occupation.
- Landlords will want some form of protection if they are covering the cost for the works to the property that a tenant will enter into the lease once the works have been completed and are not free to walk away.
- A tenant may want to use the gap between committing to the lease and entering into it so that they are not required to pay rent if the property is not ready for the tenant’s use due to works being carried out.
- It is important to annex a detailed specification of the works required on the property to an agreement for lease, so a landlord is contractually obliged to complete the works to the specified standard.
- An initial target date for the works to be completed may be included with a later long-stop date. If the latter date is reached, this may trigger a tenant’s right to terminate the agreement for lease.
If planning permission to change the use of the property or to carry out any works is to be obtained by the tenant.
- To ensure that planning permission is satisfactory, an agreement for lease can set out any onerous or unsatisfactory conditions that will not be contained in the planning permission.
- A completion date can be included in an agreement for lease, usually six weeks and ten working days after the grant of the satisfactory permission, to allow any third-party challenges to be raised during this period time.
If an existing lease is to be surrendered and the landlord has to remove an existing occupier of the property.
- A landlord may want certainty that a new tenant will be entering into the lease before removing the existing occupier, in which case an agreement for lease would be necessary.
- The agreement for lease would include a long-stop date so that the contract can be terminated if the landlord has not achieved vacant possession of the property by the specified date.
If a superior landlord’s consent is required to grant the lease.
Considerations when entering into an agreement for lease:
- An agreement for lease must incorporate all terms of the future lease, and it is important that these terms reflect the interests of the parties. Any supplemental documents, for example, a rent deposit deed, must be included.
- A landlord should have the opportunity to terminate if the tenant becomes insolvent, as they will be unable to enforce the obligations of the agreement. Both the landlord and the tenant should be able to terminate the agreement for lease if either party defaults, provided that the default is a sufficient trigger.
- If the landlord is wanting to exclude the tenant’s statutory right to renew the lease at the end of the term, the relevant notices and statutory declarations must be served before the agreement for lease is enforceable.
