In the UK, there are several types of rental tenancy agreements depending on who is renting and what they are renting. The terms for renting a business premise are different to those for renting a residential property, so it is important to understand the distinction between the two to ensure you are following the correct legal requirements.
What are residential tenancy agreements?
If you have rented a residential property, the chances are you have an assured shorthold tenancy (AST). This agreement is common for private landlords and typically involves a fixed term of 6 to 12 months. During this time, the tenant has the right to live in the property without the risk of eviction.
If you remain in the property – with permission – after the 6- to 12-month term has expired, your tenancy agreement will become a statutory periodic tenancy. This happens when there is no fixed term associated with your contract; instead, you enjoy a tenancy on a rolling basis. This type of agreement typically only exists following an AST.
A variation of an AST is an assured tenancy, which provides the tenants with more security. Unlike the 6- to 12-month fixed term associated with ASTs, assured tenancies allow the tenant to stay in the property indefinitely provided that the terms of the contract are not broken.
What if you are renting business premises?
The most common form of rental agreement for business premises is a commercial lease. A legally binding contract for the tenant and landlord, commercial leases often grant exclusive possession of the premises to the tenant. This means the tenant is completely responsible for the premises and can use it in any way they want provided that they follow the correct zoning conditions.
Beginning a commercial lease can be a costly decision; what’s more, you may find that premises need to be remodelled to make them suitable for your business.
A potentially good way to deal with the associated costs of setting up new premises is obtaining finance with a director guarantee. A useful way for new companies to renovate their premises, legal firms such as https://www.parachutelaw.co.uk/director-guarantee can help you to fully understand the requirements and process of taking out a director guarantee.
While a director guarantee can provide the necessary funding to renovate your premises, it does come with risk. Discussing your options with a solicitor is the best way to understand your obligations.