For many, signing a new lease can be an unnerving experience, particularly if it is the first time you’ve rented a commercial property.
Often an exciting but daunting time, it’s important to really understand the lease before you sign, and to be aware of the main pitfalls that can sometimes cause problems for tenants further down the line.
Here, Emyr Pierce highlights the main points to consider when leasing a commercial property:
How long are you likely to remain in the property?
Planning ahead is essential when it comes to any business, and the same should apply when taking on a new commercial property. If your business plan involves upsizing or relocating, it doesn’t make sense to sign a long-term contract that will tie you in for years to come.
Can you transfer or sell the lease?
Many tenants wrongly assume that they can assign their lease onto someone else during their lease term. Most often, leases actually prohibit assignment, and even if they don’t, you will usually still be responsible for the new tenant and how they comply with the lease. There may possibly be the option to underlet, but this can be restricted also on many leases.
Will the rent change during the lease term?
Tenants should be aware that periodic rent reviews are commonplace during commercial property leases. More often than not, this means that the rent charges will increase. Keep an eye out for rent reviews that seem overly frequent; a good solicitor can ensure this doesn’t happen.
Who is responsible for repairs?
The vast majority of commercial leases are set up so that it is the tenant’s responsibility to pay for and organise any repairs to the property, and to organise insuring of the premises. Each lease can vary considerably, so what would be the tenants responsibility on one lease, might not be on another. Ensure that the terms and conditions are fully understood before signing anything.
How easy it to terminate the lease?
Break rights exist in many leases, but not in all. Even where a break right exists, tenants must realise that the landlord may share just as many rights in terminating the lease as the tenant does. Tenants must ensure that all details relating to the ability to break the lease are completely understood and fit in with their long-term plans
Commercial leases might sound like a bit of a minefield, and in some cases, they are, but with the right advice, it can be an easy and enjoyable process. Deciding on business premises can be a tricky process in itself, so make sure you aren’t caught out on minute details when it comes to signing the deal. It is always advised that you seek the advice of a commercial property specialist as to ensure that you don’t leave yourself open to litigation further down the line should disputes arise.