Given the ongoing relationship of landlord and tenant, it is also important that both parties are satisfied with the final agreement.
The advice of experienced commercial property solicitors is essential, particularly for long-term or extensive leases which may require detailed investigations and legal searches to be carried out.
Key Considerations in Commercial Property Leases
Although there are many issues to consider as a business tenant when renting commercial property some of the key points for parties to consider prior to signing a lease include:
- Length of the lease – There has been a trend in recent years for the term of commercial leases to be shorter. Alternatively, it may be possible to negotiate a break clause in the lease allowing either the tenant or landlord to end the lease after a certain period without penalty.
- Rent – The landlord will be looking for the best payable rent and the tenant should try and negotiate where possible. Rent review clauses should also be carefully considered and structured appropriately.
- Service charges – It is common for landlords to levy service charges for services such as cleaning, heating and lighting. This charge needs to be taken into account when calculating the rent.
- Assignment or Sub-letting – It will have to be agreed with the landlord whether the tenant can transfer the lease (assign it) or
sub-let to another tenant. - Change of use – The tenant may want to change the use of the premises but landlords may not allow this if they are constrained by planning permission or restrictive covenants.
- Financial guarantees – The landlord might ask a guarantee of the rent in case the tenant defaults on a payment. Personal guarantees may carry considerable risk to individuals and should be resisted. Landlords may also ask tenants to act as guarantor for anyone who takes over the premises through an assignment or sub-lease.
- Health and safety requirements – It is important for a tenant to understand what health and safety procedures need to be in place in relation to the leased premises as tenants can be prosecuted for any breach.
- Insurance – Tenants must be clear about exactly what they are responsible for insu
ring and what the landlord is insuring. It many commercial leases the tenant has the obligation to fully insure the leased premises. - Repairing the property – In commercial leases of entire building it is often the tenant’s responsibility to repair and maintain the whole property. In such a case, it is important to take a survey to discover any defects with the property. A tenant should not have to repair anything in the property that was in disrepair before taking the lease.
- Security of Tenure – At the end of the lease the tenant may want an option to renew; this should be expressly agreed in the lease. There may be statutory provisions protecting business tenants but it is prudent to agree this explicitly.
Lease negotiations will always be subject to the individual circumstances and it is important that both parties take appropriate legal advice. Contact our team on 0113 284 5000 or commprop@isonharrison.co.uk today for more information.
