How long should I rent for?
A commercial lease is rarely granted for longer than 10 or 15 years and there is often a tenant break clause option from the beginning of year five, enabling you to terminate the lease. Try and negotiate a break clause if there is not one and also check the small print as tenants often have to comply with all lease obligations before they can exercise a break clause and your landlord could refuse simply for failing to comply with an obligation such as failing to redecorate or carry out minor repairs to the property. When the lease does come to an end, you will almost certainly have an automatic right to renew it, unless your landlord needs to occupy the premises for his own business purposes or has plans to demolish or redevelop the property.
How much rent can I expect to pay?
Find out the average rent for similar properties in the area. Most landlords expect tenants to pay rent for the next three months in advance so ask them if they will allow you to pay rent monthly in advance. You should also check if the rent will be liable to vat and if so, whether you can claim it back. If you wish to make changes to the premises most landlords will also agree to a rent-free period to compensate for this cost. In a tough economic climate, you might be successful in negotiating a lower rent – although you might find it easier to negotiate a short rent-free period when you move in.
Should I seek advice from a solicitor?
The lease is a legal contract between you and the landlord and failure to abide by the terms of your lease could lead to court action. It is therefore highly advisable that you employ a specialist commercial property solicitor from the outset. If you’re the landlord. Your solicitor will normally produce the terms of the new lease agreed between you both – and if you are a tenant, then you will need your solicitor to review the lease, explained in clear terms to you so that you understand exactly what you’re taking on and try to negotiate any necessary amendments on your behalf.
Are there any other charges and costs to consider?
Yes. These are likely to include annual insurance costs for the premises, local authority commercial rates, property taxes on the lease and utility charges (electricity, telephone, gas, water, etc.). If the premises form part of a larger building such as a shop in a retail outlet or office in a block, you may also be liable for an annual service charge which covers the cost of maintaining and repairing shared areas of the building such as visitor areas, driveways, landscaping, kitchen facilities, etc., Ask the landlord for the average year’s service charge and how this is calculated, as well as the last three years’ service charge accounts so that you can negotiate a cap on the amount.
What about repairs to the premises?
Ask the landlord to carry out any immediate repairs before you take on the lease but establish who is paying for them. You may also need a surveyor to check out the condition of the premises. Longer commercial leases are often fully repairing i.e. most landlords will expect to pass responsibility for their repairs, maintenance and replacement to you as tenant throughout the term of the lease.
Commercial Property is a highly complex area of the law. Don’t try to cut corners – make sure you have a specialist property solicitor on your team to ensure professional advice from the outset.
Tim Bishop senior partner of Bonallack and Bishop – Solicitors in Salisbury with specialist residential and commercial conveyancing teams. For expert help with your commercial lease, visit their website at https://www.bishopslaw.co.uk or call them on 01722 422300.
