3 reasons you might need an Agreement for Lease

If you’re purchasing a commercial property, you or the landlord may propose an Agreement for Lease. But what is it, and why do you need it? Let’s find out more.

An Agreement for Lease (AFL) is a legal contract between a landlord and tenant that they will enter into a lease in the future. If you are leasing a commercial leasehold property, you may find that the landlord asks for an Agreement for Lease before you complete. You’ll then be able to complete either on a specific date, or when the landlord has met the conditions set out in the AfL. Alternatively, you may prefer to propose an Agreement for Lease yourself.

The Agreement for Lease is usually there to protect the deal for the landlord while they carry out essential tasks on the property. However, it can also benefit you in certain situations, as well as help ensure the property is in a better condition when you complete. In this article, we’ll explore three reasons why an Agreement for Lease may be needed.

1 - Landlord works

If the property has been left in a bad state by the previous tenants or the landlord wants to improve the property before you take on the tenancy, they might ask for an Agreement for Lease to guarantee that you’ll take on the lease once the works are complete. While the landlord could conceivably carry out the works before putting the property on the market, there’s always the risk that it will take longer than average to find a tenant. An Agreement for Lease mitigates that risk.

If your landlord is carrying out works, ensure you get:

• Detailed specifications of the proposed works

• A deadline to complete the works

• Terms to certify the works and fix any defects

2 - Tenant planning

There may be a situation where you need planning permission to grant your use of the property or any works you want to carry out. So, you could propose to the landlord that you enter into an Agreement for Lease while you arrange the planning permission. 

This is an instance where a conditional Agreement for Lease benefits you. With an AfL in place, you’re not paying rent to the landlord while your planning application goes through. Of course, the planning process could take a long time or even be refused.

If this applies to you, make sure you consider:

• Deadlines and obligations to submit your planning application

• Keeping the landlord updated on the progress of your application

• Provisions for third-party challenges and appeals during the planning process

3 - Vacant possession

Finally, it’s possible to agree to the terms of a lease while another tenant still occupies the property. In this situation, the landlord may ask for an Agreement for Lease to guarantee they can ask the current tenants to leave and that you will take up the lease when they do.

If you’re in this situation, ensure you get the right commitments from the landlord, including:

• What the landlord will do to get the current tenants to vacate the property

• A date where you can terminate the agreement if the property is still occupied

• A guarantee on the condition of the property when you take up the lease

The value of a solicitor

As you can see, if you’re involved in a purchase where Agreements for Lease are being mentioned, there are a lot of things to think about. Agreements for Lease deal with complex scenarios and often require a lot of negotiation. It’s essential to know exactly what you’re agreeing to - and the implications of the agreement - before you commit.  

This is where your commercial property solicitor comes in. They’ll be able to explain your options and help you find the best way to proceed. If it turns out that you need an Agreement for Lease, they can draw it up, ensuring it delivers the outcome you need. Don’t enter the complicated world of Agreements for Lease alone. Get an expert in your corner.

Find out more from Couchman Hanson

At Couchman Hanson, our solicitors genuinely care about getting the best outcome for you. We’re highly professional, with ‘city’ level talent and experience, but also friendly and welcoming. Everything we do fits with our values of integrity, honesty and authenticity.

Call 01428 774756 or visit couchmanhanson.co.uk