Tenancy agreement issues

PROPERTY MATTERS

by Philip Meade,
Davis Meade Property
Consultants

HAVING spent a considerable part of
my professional career drafting and
advising on agricultural tenancy agreements,
it is fair to say that many common
issues crop up time and again,
particularly when advising tenants on
what they should and should not sign.
As a guide to some of the most common
problems, I have set out below
important clauses and issues to be
aware of.
1. Break clauses
Always check very carefully for break
clauses. The tenancy agreement may
appear to be for 10 years and this may
be clearly stated on the front of the document
but tenants should check if there
is a break clause (i.e. an opportunity to
terminate the tenancy early) and the
conditions on which such a clause can
be operated. In an ideal world, any
break clauses should be “tenant only”
break clauses and not operable by the
landlord. In reality, a 10-year tenancy
with a five-year break clause is actually
only a five-year tenancy.
2. Insurance rent (i.e. tenant in reality
pays insurance premium)
Very often, whilst the agreement states
that the landlord will arrange and pay
for insurance on the holding, a further
clause, often buried in the agreement,
then goes on to state that the tenant
shall pay an “insurance rent” in addition
to the actual rent, which usually
equates to the insurance premium
payable by the landlord. In reality,
therefore, the tenant is paying for the
insurance and has no real control over
ensuring that the premium paid is competitive.
3. Tenant’s indemnity for landlord’s
costs in dealing with all breaches
This clause often crops up and essentially
allows the landlord to pursue the
tenant for breaches of the agreement
that may occur during the tenancy safe
in the knowledge that the tenant is then
responsible for paying the professional
costs for doing so. Whilst the simple
answer may be to simply avoid committing
any breaches, this is easier said
than done, especially when the agreement
itself can be 40 pages long or
more. To allow the landlord to instruct
professionals to find these breaches and
then pass the cost onto the tenant is
unreasonable.
4. Any clause that uses the words
“best endeavours”
“Best endeavours” is legally different
from reasonable endeavours in as much
that it is arguable that “best endeavours”
does not allow the tenant to consider
what is commercially sensible for
him. A fair compromise, often accepted
by landlords, is to ask for “ best endeavours”
to be replaced by “reasonable
endeavours”.
5. Repairing clauses that seek either
to impose full repairs on tenant or do
not allow for changes to model clauses
A tenancy agreement may appear to
impose the model (industry standard)
clauses on both parties but further
clauses may seek to change this. One
agreement I dealt with recently had an
additional clause that stated “…the tenant
shall repay to the landlord the cost
of complying with its repairing
covenants under clause XXX..” .
Essentially, although the landlord had
to do the repairs, the tenant then had to
pay for them.
Philip Meade can be contacted on
01691 659658 or at
philipmeade@dmpcuk.com

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