06 February, 2017
What is the difference between freehold and leasehold title?
Leasehold title is where the Property is held under a lease for a term of years. The lease
sets out obligations on how the tenant can deal with the Property, such as permitted use,
assignment, alteration and repairs. The Tenant will also be expected to pay rent to the
Landlord either weekly, monthly, quarterly or yearly. Commercial leases usually have a
shorter term, between 1 to 15 years, with a higher rent than residential leases.
Freehold title is where the Property is owned outright and therefore the owner has more
freedom to deal with the land as it wishes. The owner will not have to pay ground rent or
answer to a landlord. It is important to note that there may still be rights and obligations
within the title which must still be complied with.
I want to sell my business - do I need to obtain consent from my landlord?
More often than not, the business will operate from a property that has been leased on a 5
year, 10 year or perhaps a longer term. In the context of a business sale, it is imperative
to ensure that the business lease is also transferred at the same time, otherwise the end
result will be that the buyer owns the business but the seller is still legally tied to the
lease. The first step for a seller is to check the conditions of the business lease as the
landlord's consent will usually be required. The right to assign the lease is generally
subject to permission of the landlord being granted, however this permission cannot be
unreasonably withheld or delayed. The landlord can however ask for references and
professional references as a minimum. Understandably, the ability of a new tenant to pay
rent will be high on a list of landlord priorities when deciding whether to give consent too.
Once the landlord has provided their consent, the transfer of the lease will then need to be
documented by a formal licence to assign.
I am currently renting a property for use as a hot food takeaway and wish to change
the use to a restaurant - can I do this?
When contemplating changing the use of a property, there are two separate issues that
need to be considered:
1. What does the Lease say about changes of use?
The Lease will usually specify what the property can be used for by the Tenant, often by
way of a defined "Permitted Use" referring to a Use Class (or multiple Use Classes) set out
in the Town and Country Planning (Use Classes) Order 1987. A hot food takeaway falls
within Use Class A5 whilst a restaurant falls within Use Class A3. Therefore, if the use
permitted by the Lease is not wide enough, the Landlord's consent will be required to a
change of use.
2. Will planning permission be required for the change of use?
Even if the Lease allows for the change of use (or the Landlord's consent has been
granted), planning permission for the change of use may also be required from the local
planning authority as it is considered a 'development'. However, a change from a hot food
takeaway to a restaurant may be deemed to be a 'permitted development' under the Town
and Country Planning (General Permitted Development) (England) Order 2015 meaning
that planning permission is not required. Before commencing any change of use, you
should always seek advice from the local planning authority to confirm whether planning
permission is required.
For more information contact Laura Bradley in our Commercial Property department via email or phone on 0333 207 1160. Alternatively send any question through to Forbes Solicitors via our online Contact Form.