
Insight
Taking a lease of an industrial unit is a big commitment, with various steps involved and the growth in industrial lettings driven by logistic demand has seen an expansion of warehouses and hubs in strategic parts of the country.
As part of the due diligence process, you will need to check whether there are any rights, obligations or restrictions affecting the property that may affect your proposed use as well as whether the property benefits from all rights necessary and has adequate access for your use and any proposed works, for example the installation of docking bays.
It is important to review the landlord’s title to the property. The landlord may own the freehold or have a lease itself. Understanding whether any third party consents are required such as from any mortgagee or head landlord if the landlord’s interest in the property is leasehold is important and impacts on overall legal costs as well as timeline for the transaction.
Heads of terms setting out the main terms of your agreement with the landlord should normally be agreed at the outset with input from experts to enable the streamlining of the transaction wherever possible.
The heads of terms should be on a subject to contract basis and cover key terms of a transaction, for example:
There may be additional costs that you will need to factor into your business plan, for example:
It is important that you inspect the property thoroughly and consider any rights which you might require over neighbouring property such as for access, parking or keeping signs, or any rights which neighbours may have or appear to have over the property.
If taking a lease of whole on a full repairing basis, it is important to undertake a survey to check the property’s state of repair and condition. If taking a lease where a schedule of condition has been agreed, it is important to check the schedule of condition report to understand any areas excluded / carve outs to the schedule of condition report and costs need to be considered as to whether landlord or tenant will cover those costs or whether these will be split. If the roof is to be inspected a cherry picker may be required which can increase costs but including the roof condition in any schedule of condition report and ensuring there are photos as well as a commentary is paramount.
Understanding any usage restrictions in the location is also key and will vary from location to location. There could for example, be noise restrictions; public safety and environmental concerns; the property may be close to a protected or residential area or have restrictions on external appearance; parking or heavy manufacturing use.
Depending on the heads of terms agreed, an agreement for lease may be entered into which may contain obligations on the landlord for example to undertake works before lease completion in addition to a licence for alterations to cover works the tenant is undertaking.
It is key to ensure that all factors are considered, both in terms of entering into the lease but looking ahead to the position when the lease ends.