Tuesday, 19 May 2021 09:26

Brodies - The Legal View - Getting rid of surplus space - don't ignore the landlord

Colin MacLaren

Excess and unused space is an unnecessary cost to a business - however dealing with surplus space is never that easy.

Of course, if you own the premises you are free to deal with surplus space as you see fit, but you do need to consider the insurance implications and the requirements of any funder.

In contrast, most commercial leases contain detailed provisions and obligations dealing with how premises can be transferred and sublet. Where transfer or subletting is permitted, it is generally subject to obtaining the prior consent of the landlord, with a variety of tests applied as to how the landlord must act in relation to any requests.

This sounds simple but rarely is.

The landlord will want to consider any potential effect on the investment value of its property that such a change might have. What rent is proposed under the arrangements? Is that a full market rent and, if so, is that equal to or more than the passing rent? How will the landlord view this if there are more rent reviews to come or if it owns other property nearby? There may well be restrictions in the lease prohibiting letting at less than the passing rent, no matter what the prevailing open market
rent is.

Sharing of let premises is likely to be even more troublesome as, in general, leases do not permit partial subletting. To gain consent to a partial sublet will involve detailed discussion and negotiation with the landlord and overcoming contract prohibition. It can and is done but requires determination and persuasion.

Accordingly, requests to landlords need to be framed with care, made at the appropriate time, and followed up diligently in order to try and achieve completion of the transaction within the desired timeframe. The process may be frustrating and time-consuming but is absolutely necessary. Handing over occupation without the landlord’s consent will put you in breach of contract, which may invalidate the insurance for the building exposing you to the costs of rebuilding in the event of damage or destruction.

Working closely with your surveyors from an early stage should mean that the troublesome issues around consent are addressed appropriately and in good time, to give you the best chance of success.

So don’t ignore the landlord, he is not going away, rather engage early and openly to seek all the necessary consents.

Colin MacLaren is a Partner in the real estate team at Brodies LLP. You can contact him on 01224 392 251 or at This email address is being protected from spambots. You need JavaScript enabled to view it.

If there are any topics you would like us to cover in future columns, please email us at legalview @ brodies.com.

The information in this article does not constitute any form of advice or recommendation by Brodies LLP and is not intended to be relied upon by you in making any specific decisions or taking (or refraining from taking) any action. If you wish us to give such advice, please contact the author.

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