When dealing with leases of commercial property, in England and Wales the rent payments are often described as quarterly in advance, which is a significant change from a monthly payment in arrears basis that you would expect to see in a residential lease.

Clearly, not only can this be confusing in the way that the rent is apportioned and calculated but the amount of each rent payment will be a more significant sum than when paying monthly.  Also, quarterly payments are also often requested in advance rather than in arrears.

This is good for landlords, who will have the security of receiving three months rent in advance but not so good for the tenant who needs to find the larger lump sum and can often cause cash flow issues for tenants although the amount of annual rent paid will ultimately be the same.

Commercial tenants should also be aware of any other payments due under the lease such as service charge which may be requested on the same basis.  In addition, some leases require reimbursement of the annual insurance premium to be paid in one annual lump sum in advance.

When looking at a lease to determine the payment schedule, payment dates are often referred to as being on the ‘usual quarter days’.  These dates which have evolved over time are always the same and fall on 25 March, 24 June, 29 September and 25 December.  A reference to ‘modern quarter days’ or ‘new English Quarter Days’ however will refer to 1 January, 1 April, 1 July and 1 October.

Although the number of days between each quarter day may vary, it is agreed that each payment which is due will be a quarter of the annual amount.  However, when completing on a lease where the rent commencement date, or final rent payment date falls within a quarter, the rent apportionment will be calculated on a daily apportionment basis.

Although quarterly rent payments are good for landlords, a tenant can often agree with its landlord for the rent to be paid on a monthly basis in advance which is better for cashflow.  However, occasionally the landlord may agree to allow rent to be paid monthly but service charge to continue on a quarterly basis, and so the tenant will need to be careful so as not to get confused as to when each payment is due.

If you have any queries relating to your lease, please do not hesitate to contact Nicolle Marchant by email or by telephone on 01494 893 514.