Commercial Leases - Can we make some simple improvements?

I want to stress to start with that I appreciate that not all leases are the same and that my views are based on English Commercial leases. They vary for a number of reasons depending perhaps on whether they refer to a retail unit, an office, 100m2 of space or 10,000 m2 of space - the reasons are endless. They are all drafted to meet the needs of the parties who will rely on them in the future and by their nature will be different.

I also appreciate that some of the leases I read are easier to navigate than others and in general the older the lease the more likely it is to be difficult to pick your way through it. More and more leases contain an index (some entirely overly populated), there has been the introduction of Prescribed Clauses and generally a better layout of definitions. They are getting more straightforward.

I do however think we could take some modest little steps as we draft new leases, to make them more akin to the 21st Century. Clearly, it will take time as older lease leases come to an end but why not consider a few slight changes?

Layout

I appreciate why the layout of a lease has not changed in the past, as they used to be paper documents that were extremely difficult to edit or amend. Today, we can move the layout around with ease. Why can’t we agree to a more standard layout of the lease, which puts 'important' clauses (rents, review provisions, breaks etc) for the landlord and tenant, in a more prominent and perhaps, more importantly, logical order? Why do I find a rent provision on page 36 of a lease, behind the clause that protects the landlord from the tenant putting too much weight on a ground-floor retail unit with no basement? Surely it would make sense to put related clauses together, why do we find the penalty interest clause randomly placed toward the end of a document albeit that it specifically relates to a clause that defines rent. Why are they not together?

A Map

Why can’t we have a simple page or two after the front cover of the lease which lists in a straightforward manner the core elements of the lease? The term, the rent, the rent start date, the service charge date, the rent review dates, break dates, etc. Why can't we do away with the 'definition ping pong' where we are bounced around the lease looking for definitions. These are simple things that would make the document easy to access. Needless to say, for example, if you need to look into the rent review provisions in more detail, you will have to refer to the full clause.

I am sure there are some reading this who will think my thoughts are trivial, unnecessary and frankly an excuse to create more work for a system that works fine at the moment. It’s a reasonable point. But we are now living in a world where the quill, ballpoint pen, the typewriter are no longer used and can implement changes, after the initial pain, easily. The lease has evolved but not in a structured, logical and layman-friendly, way.

I’ll put my neck out in the final article and propose a Map, any input into the debate is always appreciated.

Commercial Leases: The Pinball, The Why & The Weighty Tome

In my earlier article I argued that whilst the terms of a lease are paramount in their effectiveness to protect the rights of the landlord and tenant, they are often unnecessarily complex to navigate due to the different ways their drafting has evolved. In my time reading a substantial number of documents, 99% of which are electronic versions, I have come across certain layouts that are frustrating, to say the least.

Here are some examples.

The Pinball

This is maddening to the extreme. The lease starts with a menu of definitions on the first few pages of the lease. It then leads you deep into the document and you come across a term that needs defining, for example, the Term Start Date. Rather than stating the Term Start Date there andthen, it will say something like, ‘as defined in the Rent Start Date’. The reader is taken back to the start of the lease only to find that the definition of the rent start is defined as ‘The Contractual Start Date’ and we are taken even farther back until we finally find the definition we are looking for. How can this make sense?

The Indecipherable

You’ve just spent a few thousand pounds in getting your lease drawn up, and finally, just before completion, your representatives include the all-important dates in by hand. These include the date of the lease, the rent start date, perhaps some handwritten break or rent review dates. A few months later you refer to your lease to check the commencement date which is defined as ‘the term commencement date. And then you get this. Is it a five, a nine or even a zero?

Just when exactly does this commencement date start?

Why are some leases covered in crossings out, scribbles and often unreadable writing when we have word processing and a dry signature having the same weight in law as a wet one?

The ‘Why’?!

If we asked 1,000 landlords and 1,000 tenants what they considered to be the most important clauses within a lease, I doubt it would be a definition of ‘arbitration.’ And yet this can appear before any mention of the financial implications on the landlord and tenant. Indulge me if I am out of turn, but I would suggest the ‘rents’ are what is normally on most people’s minds. I recently read a lease where the rent appeared on page 36 of a 45-page document. WHY?

The Weighty Tome

I occasionally open an electronic document and discover it has more than 65 pages. My past experience has taught me that there may be a Schedule of Conditions annexed to the lease which I can ignore. The lease grows longer and longer as I scroll down, and it turns out that it has taken 65 pages to cover what would ordinarily take 32.

These are just a few examples but highlight the different ways leases are being drafted whilst all trying to offer the same protections as each other.

In my next article, I’ll try and look into whether there are some simple fixes we could all adopt.

Why are commercial property leases so complex to navigate?

Over the past 30 years in my role as a Chartered Surveyor, I have read thousands of English residential and commercial leases and property-related documents. The thing that always strikes me is that despite hundreds of years in developing a modern lease and the terms that are contained therein, for the layman, and even myself, some of them are still insanely difficult to navigate.

Please don’t get me wrong, I appreciate that the terms, which have been built up over the last millennium need to be incorporated into a lease and are paramount to its effectiveness in protecting both Landlord and Tenant. I am not suggesting we sanitise something that has been built up after years of case law but rather that we try and steer a path toward a more user-friendly document where key terms are easy to identify and the lease is only ever referred to when a more complex dispute arises.

The most critical issue right now is that modern leases have been built up over time by various legal practises that then add and amend their own generic documents. As the lease evolves into something that has withstood the test of time, the same format is used. As a result, the layout never changes. New clauses, such as the 'Pandemic Protection' clauses, which I'm seeing more and more of, are inserted in different parts of the lease depending on the existing layout and the whim of the person drafting it. I believe it is a case of "if it isn't broken, don't fix it." Why should we, after all?

In my time reading leases there have been changes and they have greatly improved since the dark days of the ’70s and ’80s. In those days the lease read like a single paragraph, and if you lost your place, it was back to the beginning assuming you could focus on it for that long. Indexes have appeared at the start to make life easier, but this is seldom by no means the case with all leases. Headings have appeared, to back up the indexes, and in general, this makes navigation easier, but again this is rarely by no means the case across the industry.

I believe there are some minor improvements that could be made to make the modern lease a more user-friendly document, without detracting from the required core clauses, and I will discuss these in a future article. The Law Society Lease was an admirable attempt to make life easier, but perhaps we need to adapt our approach as we draft new leases in the future.

In my next article, I'll look at some of the more onerous leases out there. Thanks for reading.