In the context of expansive and premium logistics premises, there is a growing trend among tenants for their customers, suppliers, and service providers to occupy specific portions of the property. This might include subcontracted delivery drivers, storing customers' goods or mechanics engaged to service vehicles, to name just a few. As this practice becomes more common, tenants are increasingly seeking to formalise the right to enter into these arrangements within the lease. When negotiating and considering these, there are a number of elements that should be incorporated into the drafting process:
- Designated Space Allocation: Define the precise percentage of the total floor space or a specific area within the premises that the permitted occupier is permitted to occupy.
- Tenant-Landlord Relationship: Include a clause that prevent the establishment of any tenant-landlord relationship through these arrangements.
- Time Limitations: Introduce a defined time frame during which the permitted occupier may occupy the premises.
- Facility Restrictions: Clearly outline the areas and facilities within the premises that the permitted occupier is permitted to access, common areas for restrictions are the offices, canteen spaces, or toilet facilities.
- Signage and Ownership Constraints: Explicitly prohibit the permitted occupier from displaying signage or asserting occupational rights to the property to third parties.
- Occupant Relationship and Termination: Require that the permitted occupier must have a legitimate contractual or business relationship with the tenant. Furthermore, once that once this relationship ends, the permitted occupier must vacate the premises promptly.
- Landlord Notification and Approval: Enforce the requirement that the tenant informs the landlord about the shared occupancy arrangement and secures the landlord's approval for the permitted occupier.
- Distinct Trading Activity: Specify that the permitted occupier's trade or business must be distinct and separate from that of the tenant.
- Consistency with Lease Terms: Ensure that the arrangement adheres to the lease's terms and is documented in writing.
Based on recent experiences, it is recommended to negotiate these conditions with tenants during the HOTs phase. This proactive approach ensures mutual understanding and agreement. A critical aspect is that the permitted occupier does not gain security of tenure under the Landlord and Tenant Act 1954, and any lease disposal necessitates landlord consent.
Given the prevalence of contractors within industrial processes, this trend is expected to become even more commonplace, paralleling the trajectory witnessed over the past decades with major department stores in prominent locations.
