Commercial Leases: When To Use Side Letters

A question we are often asked by our landlord and tenant clients is – we have agreed something with our landlord or tenant, do we need a deed of variation or can we just use a side letter in connection with our commercial lease?

The term "side letter" is often used, but actually has no official legal standing.

Side letters are often used as cost effective and speedy way to record an agreement about something arising in connection with the lease of a commercial property. Their best use is as a cost effective and quick way to document something that is temporary in nature.

We often see them used for:

• A temporary rent concession – for example, if the landlord is doing work to the rest of the building which disrupts a tenant and offers a short rent reduction or rent-free period by way of compensation to the tenant. Or a tenant is under temporary cashflow pressure, and at the tenant's request and to assist them, the landlord allows a short-term rent concession