A commercial lease agreement is a legally binding contract between the owner of the property (a landlord) and a business owner detailing rental terms.
The cost of property is hugely expensive therefore some business owners choose to rent new premises and ensuring the lease agreement covers every aspect is essential.
The cost of a commercial lease over the full agreement term can often be the same as the purchase of a property so the same level of due diligence and negotiation should be used.
The profitability of your business depends on outlays, so it is essential to keep the rent and rent review provisions to an acceptable level. Also, many leases require a personal guarantor who will be liable for all the rent and any other sums payable under the lease.
There are other crucial factors to look out for when considering a commercial lease agreement:
A tenant is required to pay a service charge towards the costs of repair and maintenance of the building and surrounding area, insurance for the property and general management. It is essential to make sure that the lease ensures these costs are in line with the repairs needed.
A provision should be included in the lease to ensure that the rent can be negotiated so it doesn’t rise above the market rate, and if the revised rent is not agreed, a decision can be made by an independent third party.
A landlord can stipulate a schedule of dilapidations at the end of the lease. This is a list of items that you are responsible for repairing. Tenants must be careful to limit this list from the outset of the lease agreement otherwise this could cost thousands of pounds.,
Alterations to the property
It is important to consider that any works or alterations that you require will usually require the landlord’s consent. This includes structural or non-structural work and could be from erecting signage to knocking down walls.
It is therefore essential to have an agreement in place to ensure you can make specific changes to the property if required to avoid any extra charges at the end of the lease.
Ending a commercial lease agreement early
Life is always uncertain, and you may need to end the agreement earlier than planned.
Should there be a change in circumstances, a break clause giving you the right to leave the premises at certain times throughout the term, should be considered. Another clause to consider would be a right to underlet or assign the lease to a third party who would continue to pay the remaining rental fees should you leave.
How can we help?
If you are considering entering into a commercial lease and are unsure of what should and should not be contained, contact the commercial property team to find out your options on 01432 278179.