“Can’t we just do a side letter?” are words a Commercial Property solicitor will no doubt hear numerous times around the year.
However such request needs to be handled with the utmost care as well as vigilance to ensure your client is not left in a precarious situation, regardless of regardless if your client is a landlord or occupant or successor to either.
Side letters are usually prepared to provide personal concessions to a tenant that the property owner would not desire to be documented in the contract itself, or cited in a file offered to the general public via the Land Registry, the most common being a decrease in rent or relaxation of a provision of the lease.
Typically such letters are customised to the individuals meaning that the acknowledgements enjoyed will remit if and when the parties stop being landlord and tenant.
If acting for either a landlord or tenant care as well as carefulness are fundamental when drafting side letters. The bordering background plus situations to the lease should be thoroughly thought about. Imagine if a tenant business is bought out via a share purchase? What if the tenant breaks agreements included in the lease or in papers ancillary to it?
Effective side letters will consider this kind of details as well as make the concession contingent on the occupant adhering to its responsibilities. If the occupant fails to accomplish this the property owner must have the ability to take out the concessions.
But even this must be handled with caution. The latest case law has demonstrated that courts are prepared to intervene when side letters are construed being “landlord biased”, uppermost recent being Vivienne Westwood v. Conduit Street Developments Limited (2017 ).
The thought approach backing this is such if the charge for a breach of a covenant or responsibility is deemed adequate, usually settlement of interest or costs at a repayment price, thereupon the abandonment of the side letter acknowledgement a result of the same infringement may be deemed extreme. Uncommonly onerous provisions should, therefore, be prevented.
In such cases, the court can effectively strike-out arrangements of the side letter to permit the concession to continue to be binding. Respect needs to be taken to the seriousness as well as constancy of the breaches contained in the side letter.
When representing an occupant it is essential to request that the side letter be prepared to ensure that it is binding on the landlord’s successors in title, otherwise you might find yourself faced with a very unhappy client who has been fined arent need far surplus of what they are utilised to because of an adjustment in landlord.
This will inevitably lead to a lessor as well as lessee conflict and might produce a negligence case against the firm. This kind of contracts, however, will ultimately count on regardless if the lessor is readied to offer this concession. Many might not but it is completely a matter for negotiation.
If representing a landlord it is important that side letters are disclosed when getting rid of intrigue in the impacted property. Error to do so might result in a claim for misstatement and the succeeding payment of damages.
In recap, side letters must not be dealt with nonchalantly. The ramifications to your client should be taken into consideration completely. There are specialized legal factors which must also be considered.
There should be a few forms of consideration for the concession even though it is a “nominal payment”. In situations where the side letter is participated in during the lease, the taking on of the lease itself will be considered sufficient.
The side letter should also be listed in the “entire agreement” clause ought to the lease include one, if it is added in to before or at the same time as the lease.
Equally when you have an arrangement for lease as well as a side letter at the same time both must pertain to each other in the body of the respective file. The problem to do so could invalidate both files as all terms of a contract for lease must be contained in a solitary document signed by both individuals according to s. 2 Law of Property (Miscellaneous Provisions) Act 1989.