Practical guidance

Principles of negotiation of new leases

Principles of negotiation of new leases

When an organisation is offered a new lease, it may well be the case that the terms are not ideal.  Whether or not the organisation  is paying anything for the lease by way of rent or premium, it is essential that there is an effort to negotiate an improved offer.

  • There is no statutory requirement on charities for a valuation with respect to acquiring property as there is with respect to a property disposal.
  • For higher value leases it would be responsible to engage a professional valuer to negotiate lease terms on your behalf but these do come at a cost.
  • It is important to remember that there is always room for negotiation of lease terms. This applies whether a lease is to be taken on a commercial basis, as a donation to the charity or as part of the arrangements in connection with a grant or SLA.
  • Charities should always look for what they want in a negotiation, rather than focusing on what appears to be on offer.
  • When they are negotiating charities should seek to draw on personal knowledge, practical common sense and such expert advice as is available
  • In the case of a purely commercial arrangement, the charity tenant is the customer and should ask for what they need and want.  Commercial landlords will not always be less sympathetic to shorter leases or leases with break rights than charitable, local authority or National Health Service landlords.  Sometimes, especially where a property is not easy to let for an alternative use, a commercial landlord may be more prepared to take a pragmatic view in order to obtain an income from the property.
  • Where there is a donation of land to the charity by way of grant of a lease or a freehold with restrictions, the arguments will rest on ensuring that the donor has given something that can be properly exploited by the charity for the purpose of the gift, without unnecessary and potentially damaging restrictions.
  • If the cost of property is subsidised in order to produce a result (e.g. to effect service provision) for the mutual benefit of landlord and tenant it is not sensible for the landlord to seek to impose provisions that will prevent effective achievement of that result unless there is a sensible reason for imposing those provisions.
  • Some commissioning bodies insist on leases when they are supplying property for the sue of the contractor because they are concerned that the other party will obtain rights to a new lease under sections 24 to 28 the Landlord and Tenant Act 1954 unless a lease is granted including an agreement to exclude those provisions.  If a lease is to be granted solely for the purpose of service delivery under a contract it in effect forms part of the contract.  Arguably, it is unnecessary as a separate arrangement and the property provisions should be contained in the SLA itself.

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