6 tips on taking on a commercial lease
If you’re looking for a commercial property to rent, it’s not just the location that’s important. We take a look at other factors to take into account…
Choosing a suitable property to operate your business from is one of the biggest decisions you’ll ever make.
Not only is it a big financial commitment, you’ve also got regulations and clauses to take into account. Before you sign on the dotted line, it’s essential that you negotiate a good deal.
1) Consider your plans for growth
Although you might not need much space right now, what about in a few years’ time?
As your situation changes, you might need to move on. In the majority of cases, a lease can be passed on to a new tenant, but you might still be liable for rent and costs.
Before agreeing to take a space, check your liabilities or whether there is room on the existing premises for you to expand.
2) Negotiate length of lease
Leases for commercial properties typically have agreements of between three and 25 years, and can offer long-term stability. Make sure the length of the lease is right for your business needs.
If your business is new, you might want to consider a short lease of three years. You’ll probably be able to negotiate this with your landlord.
By law you can renew your lease at the end of a fixed term as long as you haven’t breached your obligations or the landlord wants to use the premises themselves.
3) Request a break clause
If you’re worried about the length of your lease, ask for a break clause giving you the right to end the lease early if necessary.
You might have to pay more rent initially, but it gives you the flexibility that if something unexpected happens, you won’t be tied into a lease you don’t want. Instead, you can end it early by giving your landlord a short period of notice.
4) Be prepared for rent reviews
Your landlord will usually include rent reviews in your contract, especially if your lease is longer than five years. Some landlords might seek a review after three or four years, which can alter the amount you pay over time.
Before you sign the agreement, be aware that your rent will probably go up in line with market conditions. Try to keep an eye on rental trends to put you in a stronger position to negotiate.
5) Calculate your costs
Apart from rent, there are several other costs to consider when leasing a commercial property, so make sure you can afford them.
Business rates, stamp duty, service charges and insurance may be added to your bill. Most small businesses, particularly new ones, are likely to be asked to provide a guarantee that they can meet the cost of renting.
6) Check who is responsible for what
Who will maintain and repair the premises? If you’re renting part of an office block, for example, you might also be responsible for contributing to the upkeep of the whole building. This includes the roof and exterior walls, or lifts and the reception area.
If your landlord is responsible for insurance, you might also be expected to share that cost too. Make sure the tenancy agreement spells out your responsibilities clearly.