5 Top Tips For a Tenant Negotiating a Commercial Lease
22 November 2017 by Sarah Shea
- Suitability of the premises
It is important to know the extent of the property included in the lease to ensure that you have access to everything you need to run your business. For example, you may require a right to use other parts of the Landlord’s property in common with other tenants, such as a lift or a kitchen area. You may also need a right of access to the premises via a private roadway.
You should also ensure that the permitted use under the lease accords with your intended use of the premises.
It is unlikely that you will be able to negotiate the rent required by the Landlord but you could try to negotiate a rent free period to enable you to carry out any fit out works to the premises prior to trading.
Please be aware that it is common for the Landlord to insure the premises and recover the cost from the tenant. The Landlord may also charge a service charge to provide certain services.
- Break clause
You should try to include a break clause in the lease, especially if the lease is for a term of 3 years and above. This will allow you to terminate the lease before the expiry of the contractual term of the lease on a certain date and/or after a specified date stated in the lease. This will be useful if your business does not generate as much profit as expected and you require smaller or alternative premises.
- Repairing obligations
You should always try to limit your repairing obligation by a photographic schedule of condition. This will ensure that you are not required to put the premises in any better state of condition at the end of the term, than the premises was given to you at the beginning of the term. You should also consider whether you are required to repair the whole of the premises, or only the internal parts of the premises. Although a Landlord will usually recover the cost of his external repairs to the premises via the service charge provisions, if any.
- Landlord and Tenant Act 1954
You should ensure that the lease is within the Landlord and Tenant Act 1954 so that on the expiry of the contractual term of the lease, you are entitled to a new lease on substantially the same terms. The Landlord can only refuse to grant a new lease if limited grounds are established. This does not mean that you are required to take a new tenancy of the premises once the contractual term expires, but you are entitled to a new tenancy if you wish.
Please note that this is not an exhaustive list and there are many more factors which you should consider when negotiating a commercial lease. If you require any assistance with a commercial lease, please contact the Commercial Property team.