Getting your foot in the door

A practical problem which has befallen many an occupier: you have found a new unit for trading and agreed heads of terms with the landlord; the lease and licence for alterations are being negotiated via solicitors; you now need to go in and start trading; however, the landlord will not give you the keys until the lease documentation is completed. A high-trading period may be on the horizon and you stand to lose potential profits. Perhaps you have booked suppliers to deliver stock or contractors to start your fit out based on when you expected the lease to complete, and now you face the prospect of being charged for the delay.

One point (often noted in hindsight) is that that guesses of time scales for completion may prove wrong. Leases and related documents can take time to get completed, even if you have urged your solicitor just to get the job done; unexpected delays can arise from either side. So you might well avoid booking in contractors to start on a particular date as you run the risk of them turning up on the doorstep without being able to get in (and charging you by the hour for their time).

Another point is, of course, to make sure that you are doing what you need to on your side to avoid potential delays to completion. Whilst this sounds obvious, other units and business concerns may have diverted attention and little more may have been done to progress matters with the landlord itself than chasers to the solicitors. For example, you may well not want to complete your lease of the unit without completion at the same time of a licence to alter which provides the landlord’s consent to your fit out. A licence for alterations needs proper drawings and a specification detailing the works and the landlord will want time to consider and make comments on these, so make sure you provide them early to the landlord and chase for approval.

If, however, you do find yourself up against it time-wise, a possible route to get you into the premises without a lease completed is an early access letter. This is a letter where the landlord permits a proposed tenant to enter on a mere-licensee or key-only basis pending completion of the lease. It sounds like an easy option, but there are issues. For example:

• Some landlords (particularly big institutions) will not consider early access letters at all (because of the perceived risks associated with an informally documented occupation). Others may consider an early access which permits the proposed tenant to trade from the premises but not to carry out any fitting out works (or vice versa).
• The wording of early access letters generally tends to be very landlord-friendly. It is important that you instruct a solicitor to review the draft letter (as well as the lease and related documents generally), and you might consider the time and effort on this better spent on trying to get the actual lease and related documents over the line.
• One example of drafting heavily in the landlord’s favour is the typical provision that the landlord has full discretion to kick the proposed tenant out at any time and for any reason (even if it has already paid the landlord, for example, licence fees in advance). This puts the proposed tenant at the landlord’s mercy until the landlord actually completes the lease; the landlord is free not to do so, so there is a risk that the occupier will find the rug pulled out from under its feet, out of pocket for costs incurred for fit out works, and suffering the headache of finding alternative premises fast.
• Landlords will typically want a properly countersigned side letter before handing over a set of keys. Although they might accept a scan of the countersigned side letter, if the lease and related documents are already in agreed form and the only delay to completion is getting them signed, you might consider the time and effort better spent in getting these signed and couriered back to solicitors than on a headache of getting an early access letter in place for the benefit of getting a key perhaps just a day or two sooner.

Early access letters are not an attractive fall-back option. They can be a recipe for disaster given that an occupier can be left high and dry without a unit even after moving in and incurring costs on it. It is better to put efforts into progressing on the agreement and signing of the lease and related documentation, and to building allowances for delays into moving plans and forecasts, to help avoid the situation where an early access letter becomes a necessity.

Roland Brandman, Associate, Fladgate LLP (rbrandman@fladgate.com)