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BLOG: Leasing a Commercial Premises – Advice for Tenants
Taking on commercial premises is part and parcel of running and successful business. Some clients may therefore overlook the serious nature of entering into a lease, including the extensive obligations involved. Whether you’re taking on your first commercial lease or have done it several times over, here is some advice that should help to protect your interests.
1. Plan ahead. If you’re looking to lease a new business premises, you need to start the process sooner rather than later. Property transactions have a habit of taking longer than expected. Also, planning early allows more breathing space to search for premises and negotiate the best deal. It never ceases to amaze us when clients come to us and want to start the lease within a matter of days. This is only usually beneficial to the landlord; allowing more time allows the tenant the chance to not only agree a better price, but also better terms (as below).
2. Negotiate. When agreeing a commercial lease, don’t forget that everything is up for negotiation – length of lease, repairing responsibilities, break clauses, the number of rent reviews, not to mention the rent itself. Many tenants do not grasp this, and simply accept the initial terms proposed to them. It may be that the landlord/their agent had allowed room for negotiation in their opening offer and would have been willing to compromise. Common business sense applies here and if a property is in high demand, it’s unlikely that a low rental offer would be accepted. However, if a commercial unit has been vacant for a long time, the landlord may be open to accepting a lower rent, or granting a rent free period.
3. Limit your repair liability. Most commercial Lettings are on ‘Full Repairing and Insuring’ leases. This means that the tenant is fully responsible for all repairs to the building. Many tenants mistakenly believe that their only obligation is to hand the building back as they found it, and are given a nasty shock when they are served with a claim for additional repairs when their lease ends. This situation can, and should, be averted by having a Schedule of Condition attached to the lease to record the condition of the property when the lease started, so that the tenant is not required to hand the property back in a better condition.
4. Take legal advice. Remember that the landlord’s agent and solicitor are there to look after the landlord’s interests, and not the tenant’s. If you’re unfamiliar with the process of leasing a commercial property then it’s essential to find yourself a good solicitor. If you are familiar with the process, then you probably already have one.
5. Instruct a surveyor. A surveyor with knowledge of the local market can help you source suitable premises and negotiate the best deal. Having professional representation also creates a positive first impression when negotiating with landlords and agents. A tenant who employs their own surveyor or agent is often seen as a serious, professional outfit, which can give you an edge in negotiations. A surveyor can also assist by preparing a Schedule of Condition, and advising on how best to protect yourself from dilapidations claims in the future.
If you are considering entering into a business lease and require a specific service, or simply need to talk through your options, Lea Hough’s experienced commercial property advisors are on hand to assist.
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