Firming up ‘handshake’ agreements – commercial lettings on farms and estates
We’ve listed the main points to consider below:
If the property being leased isn’t accessible from a main road, setting out how the tenant gains access to the property will prevent unwanted access to other parts of private property.
Confirmation of how the tenant proposes to use the land (for example, what will they be storing?) to ensure that it won’t cause any damage to the farm or affect the use of the surrounding land.
In a commercial lease it is standard for the landlord to insure the property (and seek a proportion of the premium from the tenant) but the existing insurance may not cover the use of the property by the tenant or any damage they may cause.
If the tenant is using an existing building, will they be responsible for maintaining it? In addition, if the tenant is using a shared access, their use of such access may increase the maintenance costs so it may be prudent to ask them to contribute to the costs.
Often parties to an informal agreement will not have discussed how the arrangement will come to an end (i.e. will it be for a fixed term?). This is particularly important for the landowner who may wish to take possession of the land before the tenant wants to leave.
If an agreement is unwritten, certain terms will be implied by law - in particular security of tenure (i.e. a tenant’s right to a renewal of the lease). This can be excluded by a written agreement.
Whilst it is clear that a full commercial lease is too detailed for such arrangements (especially given their length and value), a short agreement that covers the basic provisions can prove useful in the event of a dispute.