Check your commercial lease carefully!

Sheffield City Council recently fell foul of provisions in its own leases. During 2011 and 2012 the Council carried out a major programme of work to its one thousand or so flats and maisonettes, including the fitting of new cladding, structural strengthening and block improvements.

The Council obtained a government contribution for part, though not all, of the works. The Council decided not to reduce the payments of any of the tenants towards service charge contributions. The Council took the view that because not all of the blocks on the estate qualified for funding, it would be unfair to allow some tenants a reduction but not others. One of the tenants argued that the cost of these works had not been reasonably incurred by the Council and that the Council should have reduced the service charge contributions of some of the tenants.

The decision went against the Council for the seemingly straightforward reason that the Council's approach to tenant contributions and the funding had not been in accordance with the requirements of the Council's own leases. The fact that the Council had tried to act fairly and in good faith was not relevant as the Council had not followed the terms of its own leases.

Even if a landlord considers that it is apportioning service charges fairly, it cannot do so if the terms of the lease do not allow this.

This is an important decision and, of course, could cost a landlord a considerable sum of money. Accordingly, it is important to ensure that not only are commercial leases properly drafted in the first place, but that the terms of them are subsequently followed by the landlord.

To discuss your commercial property requirements, contact us.