The A to Z of Moving Office

Moving Office Glossary

1954 Act

The Landlord and Tenant Act 1954 is a statutory code governing business tenancies. Part II of the act gives business tenants a degree of security of tenure. A business tenant protected by the act may not be evicted simply by the giving of notice to quit or by the ending of a fixed term of the tenancy. The landlord must serve a notice on the tenant, giving them an opportunity to respond. Both parties can agree not to be covered by the act (usually referred to as a lease that is “outside the act”).

Archiving & Storage

Archiving of documentation and/or secure storage can be a flexible, safe & cost-effective solution to free up valuable and costly office space. It can be accessed at any time by arrangement & provides excellent off-site backup for damage limitation in case of fire or other disaster.

Arbitration

A method of settling disputes by reference to an independent and impartial third party, usually an arbitrator appointed by the Royal Institute of Chartered Surveyors (RICS). Arbitration is essentially an adjudication of the arguments of the parties.

Assignee

A party to whom a lease has been assigned.

Assignment

The transfer, from one company to another, of the whole of the tenant interest in the property for the remainder of the period of the lease. Once a lease has been assigned, the assignee becomes responsible to the landlord for paying the rent and fulfilling the other obligations of the lease.

Assignor

One who assigns a lease.

Break Clause

A clause in a lease giving either or both parties the right to terminate a lease within specified circumstances.

Building Insurance

A standard Buildings Insurance Policy is likely to cover: contents (property/fixtures/fittings/stock/equipment) against loss or damage; business interruption; public liability, employers’ liability and legal expenses. The depth of the cover will vary depending upon your requirements.

Business Rates

Businesses that occupy non-domestic premises are required to pay non-domestic rates, often called business rates. The payments help fund local services provided by local authorities, such as the police, fire & rescue service, refuse collection and upkeep of roads etc.

Capitalisation

The value of an asset assessed in relation to the expected future income (ie rental) stream.

Comparables

In determining the initial rent, or the market rent during the course of a rent review, parties and those acting on their behalf will have regard to evidence of rents for similar properties.

Covenant

This term is used to denote the financial stability (& worth) of a tenant and hence their risk of default, which will have a bearing on the granting (& value) of the lease.

Dilapidations

Most commercial leases lay out the obligations on the tenant for returning the property at the end of the lease in the state in which it was when you moved in (as outlined in the dilapidations section of your lease). Dilapidations are the extent of repairs needed to put a property into the condition in which it should be as required by the lease.

Disability Discrimination Act (DDA)

An Act to make it unlawful to discriminate against disabled persons in connection with employment, the provision of goods, facilities and services or the disposal or management of premises; to make provision about the employment of disabled persons; and to establish a National Disability Council.

Estimated Rental Values (ERV)

An estimate of the rental which a property is likely to command in the open market at a given time.

Fit-Out

Fit-out encompasses everything from the space planning, interior design, project management, fitting out & furnishing of your new office.

Full Repairing & Insuring (FRI) Lease

An FRI lease requires the tenant to pay all running costs (eg maintenance, rates and insurance).

Head Lessee

Where a sub-tenancy (or series of sub-tenancies) exists, the head lessee is the highest leaseholder in the chain (ie the tenant who signed and still holds the original lease). The head lessee remains responsible to the landlord for the payment of rent and fulfillment of other obligations.

Headline Rent

The rent apparently being paid – which may not take account of concessions such as rent-free periods.

Heads of Terms

These are the main points of agreement drawn up between contracting parties setting out the basis of the agreement. They are then used by the parties’ solicitors to draw up a full legal contract which will cover in far more detail the heads of terms. Heads of terms are not legally binding but are usually considered to be morally binding.

Investment Yield

Annual rent passing as a percentage of the capital value.

Lessee

A party to whom a property has been let (ie the tenant).

Lessor

The party letting the property (ie the landlord).

Licence

A permission, in writing, given by the landlord to the tenant in accordance with the requirements of the lease. Licences may include: licence to assign, licence to underlet or licence to carry out alterations.

Market Rent

The best rent at which a property might reasonably be expected to be let with vacant possession in the open market, with a willing landlord and tenant, taking full account of all terms of the tenancy offered.

Permitted Use

The use for which the property can be put to. No other use will be allowed unless the landlord’s consent has been obtained.

Premium

A sum paid at the outset for the purchase of a lease. Or, the price a lessee pays to a lessor (usually in return for the rent being reduced to below what otherwise would be payable).

Prime Location

The most desirable or sought after location.

Prime Property

Prime property is likely to be a modern or recently refurbished building, finished to a high specification, well situated in a commercially strong geographical location and appropriate for (or already let to) a good tenant.

Property Consultant

With regards to moving office, your commercial property agent’s main functions are to find you the most suitable property and then negotiate the best financial terms on your behalf. Their role is likely to involve: identifying the right property for you, conducting viewings, advising on the suitability, providing cost analysis of preferred options, negotiating terms, liaising with solicitors, keeping you abreast with progress & monitoring the transaction until completion.

Commercial Property Solicitor

When moving office, the main role of your solicitor will be to ensure that the terms which you or your agent have negotiated are reflected in the final lease. Importantly, they will negotiate the detail of the lease documentation to minimise your exposure to potential liabilities, and subsequently, to advise you on the implications of the detailed terms in the final documents to ensure you are aware of your ongoing responsibilities.

Quiet Enjoyment

Most leases contain a covenant for "quiet enjoyment" - entitling the tenant to enjoy his lease without lawful entry, eviction or interruption.

Rack Rent

The best market rent obtainable.

Rent

The payment made by the tenant for the use of the property. Typically the rent is payable quarterly in advance on set dates named in the lease (usually 25th March, 24th June, 29th September, 25th December).

Rent Deposit

Most leases will require the tenant to pay a rental deposit on all new lettings – and is a payment made to the landlord as security for the tenant's obligation to the landlord under the lease. The amount can vary according to the length of the lease but will typically be between 3 and 12 months. This is held by the landlord throughout the term of the lease & may be drawn upon in the event of any rent arrears or non-compliance with any of the lease covenants. The rent deposit deed will set out the conditions when the deposit can be released either to the landlord or back to the tenant.

Rent Passing

The actual current rent being paid.

Rent Review

Leases generally contain clauses providing for a periodical review of the rent (ie at five yearly intervals). A Rent Review is the process by which the rent payable under the lease can be examined during the period of the lease and set at a new level on the date specified in the lease. The lease will generally specify what the basis of the review is to be (eg the open market rent prevailing at the time of the review, or upwards only).

Rent Review (Open Market)

Where the rent review clause provides that the rent on review should be based on the open market prevailing for new lettings.

Rent Reviews (Upward Only)

Clauses in leases providing for regular reviews at which the rent will be fixed: at either the current rent passing or the open market level – whichever is the higher.

Rental Value

The rent that a property might reasonably be expected to command in the open market at a given time, subject to the terms of the lease.

Repair

This usually implies an obligation on the tenant to put right any defect in the property at the commencement of the lease and to then repair the property in good condition throughout the term of the lease. An obligation to repair may also imply an obligation to replace or renew any part of the building or fixtures and fittings in the building which deteriorate beyond repair during the term of the lease.

Restrictive Covenant

This relates to a covenant in a lease restricting the tenant in some respect.

Reverse Premium

The payment of a sum of money paid on assignment by the assignor to the assignee (eg to reflect the unfavourable lease terms where the property may be over-rented).

Reversion

The return of property to the landlord on the expiry of a lease.

Secondary Property

A term used for property which is defective in one or two aspects of the characteristics of a prime property.

Security of Tenure

This is the statutory right of a tenant to renew the lease at the end of a term. Part II of the Landlord and Tenant Act 1954 gives business tenants the security of tenure. If you want to ensure that you can stay in the same business premises when your lease ends, you should check with your solicitor that the lease does not exclude the protection of the Landlord and Tenant Act 1954.

Service Charge

The service charge is the means by which a landlord is able to recover from the tenants the cost of providing the services for the benefit of those premises. Items include maintenance & repair of the property as well as the provision of heating, lighting, cleaning, security, etc.

Stamp Duty Land Tax

SDLT is a transaction tax, payable by the tenant, on the lease of UK land and property. It is generally based upon the value of the consideration provided for in the lease of the property.

Subletting

This is where the tenant lets part or all of the premises to a subtenant, as permitted by the terms of the lease. It differs from assignment in that the head lessee remains responsible to the landlord for the payment of rent and fulfillment of other obligations.

Termination

This is the coming or bringing to an end of a lease; by mutual agreement, by the lease coming to its natural end or by the exercise of a right of one of the parties.