Business Leases - Top Ten Tips On What To Look Out For 07 April 2015
These points are written from the point of view of tenants looking to take a lease. Of course, from the landlord's prospective, they would be arguing the opposite in many cases.
1. Length of lease - don't take on too long a term. A shorter term reduces your risk, unless you are in the business where particular premises are vital to you, or you are spending a lot of money on them.
2. Break clauses - it is always worthwhile trying to negotiate these, entitling you to terminate the lease on particular dates agreed. Be careful about any conditions the landlord seeks to impose for the exercise of the break.
3. Repairing obligations - in a short term lease generally the tenant should not have to take responsibility for the structure and exterior of the premises. N.b. beware - legal jargon does not always mean what it seems you may be taking on greater obligations than you think - get the clause checked out by solicitors.
4. Alterations - typically the landlord's consent is necessary for alterations you may wish to make. Consider negotiating provisions entitling you to make interior non-structural alterations without consent. Top tip - if you are proposing alterations at the outset ask for the landlord to confirm that you will not have to pay any legal costs, or surveyor's fees, in approving your alterations as part of the deal.
5. Rent - it is always worthwhile talking to occupiers of neighbouring properties to get a sense of comparable rents and seeking to negotiate. Over the past few years the market has generally been in favour of tenants in this respect.
6. Rent reviews - obviously the longer the interval between rent reviews the better. In a short term lease e.g. 5 years, it may not be appropriate to have a rent review at all. The lease will contain "assumptions" and "disregards" in assessing amount on rent review - legal advice is important on these.
7. Signs - make sure that the landlord is going to consent to the type and location of your sign. Leases generally give the landlord an absolute right to object.
8. Rights granted over other premises - check that the lease gives you rights over any adjoining or neighbouring properties if needed e.g. where are you going to put your bins?
9. Legal costs - in most transactions the tenant should not have to pay the landlord's legal costs and you should negotiate these at the outset.
10. Legal due diligence - above all don't sign the lease without getting a solicitor to check it out for you. Generally it is a good idea for the solicitor to raise some enquiries before lease with the landlord and to effect some searches to ensure that there are no problems e.g. does the landlord have consent of any mortgagee to grant the lease? (If not, if the landlord becomes insolvent you may be thrown out), or is there planning permission for your use? (If not, the planning department may enforce and close you down).
If you would like any further advice or explanation on any of these points please do not hesitate to contact us.