This contribution is based on commercial property law and practice in England & Wales and generally.
Renting commercial property for the first time is a big step for any business, not only because of the big financial commitment you’re making. With a large number of regulations and clauses in the lease, it can be easy to get trapped in an agreement for five years when you may want to change location after two or three. What if, as a business, you want to change what you sell or offer after a while? Is there a clause that restricts you from doing so? To avoid any large and costly pitfalls, here are some problems that you could face as a commercial tenant.
Room For Growth
Before agreeing on a space, check if the landlord will rent out the floor so that when your business grows, your office space can as well. In the UK, there are a lot of buildings, especially older ones, which are rented out as commercial premises, so it’s vital that you check that the premises you’re renting has up-to-date infrastructure suitable for your needs, for example, are there raised floors for sockets? Does it offer the speed you need for broadband and other technology?
Length Of The Lease
A typical lease lasts for five years. If this seems like too much of a commitment, you need to make sure that you can assign the space to another business during this time. Be aware that some new tenants could be unwilling to assume costs of building dilapidation liability if they take an assignment of the lease for a shorter period. This means that the original tenant could still be liable. Dilapidations are areas of a building that are in poor condition which tenants will have to set right or pay to have fixed under their lease.
User Clause
Leases typically have clauses which specify the exact type of activity the tenant can carry out within the premises. For example, if a restaurant starts to make online sales with food being collected from the shop, this could break the clause unless a provision for any future change is outlined in the lease when first negotiated.
Break Clauses
It could also be worth considering a break clause to get out of a lease if needed. A tenant may have to pay more rent at the start, but if anything were to happen to your business, then a rolling break clause is worthwhile as it will enable the tenant to leave at any time, usually giving 3 months’ notice to their landlord.
Forfeiture
Forfeiture enables a landlord to bring a lease to an end should the tenant default on any of the terms outlined in their agreement. It is typically used by landlords to terminate a commercial lease, but it isn’t always the best option for them or the tenant. It is possible for a tenant to claim for financial loss if a lease is ended in the wrong way, and the tenant may be able to bring a claim for unlawful forfeiture.
If you have any questions regarding your commercial lease, then it is best to seek advice from specialists in commercial property management for advice and guidance.
