Commercial Property

Commercial Property Jargon Buster

Agreement for lease
An obligation to enter into a lease once certain preconditions e.g. completion of works on the premises by the landlord, are satisfied. (A written agreement to which a copy of the lease is attached)

AGA – Authorised guarantee agreement
An agreement requiring a tenant to act as a guarantor for the party to whom a lease is assigned.

Alienation
The ability of a Tenant to dispose of the lease if they no longer want it by an Assignment (passing the lease on to a third party); Sub or Underlease (continue to be liable under the lease but allowing a third party to occupy in exchange for picking up your obligations under the lease – you have control and the responsibility is still yours)

Assignment
The transfer of a lease to another party. A correctly executed assignment of the lease passes all associated costs and liabilities onto the new tenant.

Break clauses
The ability for one or both parties to end the lease early on the service of notice.

Building surveyor
A surveyor specialising in building surveys, preparation of schedules of condition or dilapidations and planned maintenance.

Chartered surveyor
The generic term for surveyors who have achieved the professional standards set out by the Royal Institute of Chartered Surveyors (RICS).

Commercial property surveyor
A surveyor specialising in property agency, rent reviews, lease renewals, landlord and tenant issues and commercial property management.

Covenants
Promises that one party a party to a lease or deed makes to the other.

Demise
The extent of the premises.

Demised premises
Land or property sold or leased for a term of years.

Deposit
A percentage of the purchase price paid upon exchange of contracts or a bond requested by a Landlord on the grant of a lease.

Dilapidations
A schedule of condition of the property the subject of sale purchase or lease.

Forfeiture
The right of a landlord to terminate the lease early if the tenant fails to comply with the lease. In practice, this right is rarely exercised as a Court will generally give a tenant ‘relief from forfeiture’ if they remedy the breach of the lease.

FRI Lease
A full repairing and insuring lease where the costs of all repairs and insurance are borne by the tenant. 

Guarantee
To be responsible for another party’s obligations under a lease, should that party default.

Guarantor
A party that agrees to be responsible for a tenant’s obligations under a lease, should the tenant default.

Headlease
The lease agreement between a freeholder and his immediate tenant.

Headline Rent
The rent apparently being paid, which may not take account of concessions such as rent-free periods.    

Heads of Terms
A summary of the key points to be included in a lease.

Interest (in property)
A right, legal share, or financial involvement.

Internal repairing (IR) Lease 
An Internal Repairing Lease (IR Lease) whereby the landlord retains responsibility for structural and external repairs without reimbursement.  The tenant’s only responsibility is for repairing the inside of the let premises and contributing towards the maintenance of any common parts via a traditional service charge.

Landlord
The person who grants the lease or who has the right to enforce the terms of the lease. Sometimes known as the “Lessor”

Landlord and Tenant Act 1954 (applying to England and Wales only)
The act of parliament that gives tenants security of tenure (the right to renew a tenancy on essentially the same terms when it comes to an end) on a commercial lease. Your lease is usually referred to as being inside’ or ‘outside; the act. Inside means that you will have a right to a new lease when your current lease ends, ‘outside means that you will not.

Lease
A legal agreement between the landlord and tenant that sets out the terms of the tenancy.

Leaseholder
A party that has been granted the right to occupy a property for a given length of time.

Lessee
One who leases property from another.

Lessor
One who leases property to another.

Licence (1)
The granting of permission to occupy a property without the formality of a lease or tenancy agreement.

Licence (2)
A landlords consent. Under a lease, certain actions by a tenant, such as altering the premises or assigning or sub-letting the lease, will require the landlord’s consent. When this consent is given, the landlord grants the tenant a licence to undertake the activity.

Licensee
A party to whom a licence is granted.

Licensor
The party granting the licence.

Mezzanine Floor 
Is an intermediate floor that can be installed post construction, height permitting, to provide additional storage /office space.

Quiet Enjoyment
Implied obligations of a landlord that a tenant’s peaceful enjoyment of the premises shall not be interfered with by the landlord or by any person who claims under him. The Tenant’s remedies for breach of his/her quiet enjoyment are damages and injunction

Rent
The amount you pay to use the property. Rent is separate to service charge or insurance premiums which are charged on top of rent.

Rack Rent
The best market rent obtainable

Rent Review
After a period of time rents can be reviewed by the Landlord and generally move upwards.

Repair
Tenants are required to keep the property leased in good or substantial repair and repair clauses are included in the lease

Security of Tenure
The right to renew lease when they end.

Service charge
An amount the Tenant pays to the Landlord for managing the premises

Sub-tenant
If a landlord is not the freeholder then the tenant has been granted a sub-lease and they are known as sub-tenants. Generally this means the tenant has two landlords.

Tenant
The person who rents the property from the Landlord (also known as “Lessee”)

Term (Lease Period)
The period of time the property is rented