Top tips for tenants when taking a commercial leaseApril 24, 2017
Entering into a lease of a commercial property can be a daunting process, but with good planning, you can avoid some of the traps or hidden costs. Here's our top tips on what to look out for.
Check the state of the property carefully, if it needs works, the Landlord should do this up front. Otherwise accepting a covenant to “keep” the property in repair means you will have to improve it. Attaching a photographic schedule of condition to the lease can be useful. Look out for hidden repair costs which may be recovered by the landlord through a service charge.
Will you need to adapt either the inside or the outside of the property to accommodate your business? You may want to install internal partitioning, without asking the landlord. Do you have the right to install adequate computer connections, telephone points, signs? If not these should be incorporated in the lease.
Transferring your lease
Do you need flexibility to either sell your lease, or allow part of your premises to be used by another party. You may only be able to sell your lease to a company of similar financial standing. The landlord will want to control how many tenants are in the building, and may not want any relationship with a sub-tenant.
Landlords will often want to right to increase your rent during the course of the lease. There are two ways they can do this:
- A market based rent review. This is the best rent that can be obtained for renting the premises on the open market. It will normally be upwards only, so you need to restrict the frequency. On a good property, a market rent review provides the highest rent for the Landlord, and is commonly used.
- A retail prices index based rent review. This is less popular. Increases are set in line with the rise of the retail prices index. The general state of the economy determines the rent level rather than the property market.
Do you want the right to end the lease during the term? The landlord may want to prevent you ending the lease until they have another tenant lined up, so the break clause needs to be effective. Normally you will need to commit to leaving the property empty, and doing any outstanding repairs, and paying all rent and service charge payments prior to leaving.
These issues are important to get right from the outset. We can assist you with the lease. Please contact a member of the commercial property team for advice, call us on 0117 930 8477.