Heads of terms fundamentally set out they key terms that have been agreed between the parties in a commercial transaction and can be both non-binding and binding. Typically, the heads of terms will be produced by an agent of either party for approval but commercial solicitors can also be involved in the negotiation of the heads of terms. The key details covered by the heads can include the price of rent, any agreed incentives and break options.

This will depend on the wording of the lease itself.

The standard covenant in a lease to keep premises in repair will require a tenant to first put the premises into repair (according to their age, character and locality) and then to keep them in repair. This could be a costly lesson for the Tenant if not negotiated carefully.

A tenant should therefore, give careful consideration to its position if the premises will not be in good repair at the commencement of the lease and the lease either imposes an obligation on the tenant to ‘keep’ the premises in repair or there is a service charge commitment covering a landlord’s obligation to this effect.

There are ways to try and exclude or qualify repairing obligation. Possible options open to a tenant are to require the landlord to do the repair work prior to the commencement of the lease or compensate the tenant for the cost, possibly by giving a rent free period or to modify the repairing obligation by reference to a Schedule of Condition.

It is also possible to try and negotiate certain exclusions, for example fair wear and tear, or where the premises have recently been constructed, inherent or latent defects arising from the original build.

A covenant to repair in a lease should not be allowed to give the landlord a different thing from which the tenant took when he entered into the lease.

The term dilapidations, is more usually applied to breaches of the lease covenants and the process of remedying those breaches.

In Northern Ireland, Dilapidations are talked about most often at the end of a lease, though depending on the terms of the lease entered into, these may also be applicable during the term.

To simplify, a schedule of dilapidations is a document which sets out the alleged breaches, usually on the part of the tenant. Depending on the timing of service of the schedule, and if this is at the end of the lease, this will usually indicate the cost of remedying the breaches.

A schedule of dilapidations served during the term, more commonly referred to as an Interim Schedule of dilapidations, does not usually refer to cost as the intention is for the party upon which it is served, to rectify the breaches.  Most commercial leases, will afford the Landlord the right to enter the property and carry out the repairs or remedy the breach and then seek to recover the cost from the tenant.

Most schedules of dilapidations relate to breaches of the repairing and decorating obligations in the lease. If the tenant’s obligations are not adequately addressed, a claim for dilapidations could be a costly fall out at the end of the lease.

Best practice would involve a surveyor or architect preparing a “Schedule of Condition”, this being agreed with the landlord or his surveyor or architect and then incorporated in the Lease. The Schedule of Condition will be linked to the repairing obligations in the Lease so as to ensure that at the end of the Lease the Schedule of Condition will be the standard against which any disrepair will be measured or assessed. This again leads to greater certainty and leaves less room for dispute between the parties and costly dilapidations claims.

For most landlords and tenants, looking at their commercial lease, it is assumed that the term referred to in the lease is absolute and that on the date specified in the lease, the tenant is obliged to vacate the premises.

If the lease however, is one to which the 1996 Order applies, the lease does not come to an end automatically on that date and can only be terminated in accordance with the provisions of the 1996 Order. To recite from the 1996 order:

A tenancy to which this Order applies shall not come to an end unless terminated in accordance with the provisions of this Order; and subject to the following provisions of this Order such a tenancy may be terminated by:

• a notice to determine served by the landlord in accordance with the provisions of Article 6; or
• a request for a new tenancy made by the tenant in accordance with the provisions of Article 7

In essence, what this means is that the lease continues until either the tenant requests a new tenancy or the landlord seeks to determine the lease in accordance with the legislation.

The law relating to the Business Tenancies (Northern Ireland) Order 1996 is complex and tenants and landlords alike are cautioned to take specialist advice in relation to service of notices as strict timescales apply.

If a tenant is keen to preserve the goodwill which attaches to the premises which they trade from, they need to familiarise themselves with the law and procedure relating to this area.

If a landlord refuses the grant of a new tenancy, a tenant needs to understand the grounds upon which a landlord can do that, and whether or not they are entitled to be compensated for such refusal.

The landlord may also wish to determine the existing lease in an effort to offer terms for a new lease where the market is rising.

Disputes relating to Business Tenancies are addressed by a distinct court called the Lands Tribunal of Northern Ireland, who have wide statutory powers in determining the terms of new leases, including rent and duration.