If you are a business tenant looking to rent new premises there are many things you will need to think about, from the obvious practicalities such as location and cost, to the necessary legalities, not least your rights and responsibilities as set out under the commercial lease agreement.
Why is a commercial lease necessary?
The commercial lease agreement is a legally binding document defining the contractual relationship between you (the lessee) and your prospective new landlord (the lessor). It is the principal document that will govern your occupation of the property.
The lease will set out in writing the respective rights and responsibilities of both parties for the duration of the lease term.
What does a commercial lease contain?
Commercial lease agreements can very often vary, although all commercial leases will contain key provisions setting out 1) the parties to the agreement, 2) the amount of rent payable and 3) the term of the tenancy.
Additional clauses are likely to include your permitted use of the premises, provisions for alterations, repairing obligations, insurance and rent review provisions, as well as provisions for lease renewal or termination of the tenancy.
The commercial lease agreement should also make provision for dealing with your proprietary interest in the lease, for example, whether or not you are permitted to sublet the premises or assign the lease to a prospective buyer.
Can I negotiate the terms of a commercial lease?
Given that commercial lease agreements can vary, there is often scope to negotiate the terms of a lease to suit the needs of your business. If a lease is non-negotiable, and the terms are too onerous, you should consider walking away.
You should also consider seeking expert legal advice prior to entering into lease negotiations, with a view to limiting your liability and protecting your security of tenure. If you have not yet signed a commercial lease agreement, all aspects of the lease remain negotiable.
In particular, you must ensure that the lease not only reflects your business requirements right now, but at any given point in the future. There are various factors that may come into play here, for example, you quickly outgrow your new premises and need to move on again, or down the line you decide to cash in on the success of your business and sell up.
Can I risk signing a commercial lease without seeking legal advice?
Commercial leases can be long and complex, containing confusing legalese and all sorts of complicated clauses. Yet the future success of your business could hinge entirely upon a clause buried in the detail that you are wholly oblivious to.
There are multiple factors to consider before signing a commercial lease, including:
- For what purpose can I use the leased premises?
- Can I carry out alterations to the property?
- Who is responsible for repairing and maintaining the property?
- Who is responsible for any buildings insurance?
- Can my rent be increased and, if so, how often and by how much?
- Will I be able to sub-let part or all of the premises?
- Will I be able to assign my rights under the lease?
- Can I end the commercial lease early?
- Can the commercial lease be renewed?
It is always best to seek expert legal advice before signing any commercial lease agreement. Without a detailed lease review you may unwittingly sign away important rights, whilst signing up to several responsibilities you fail to appreciate.
Your solicitor can undertake a detailed lease review or carry out the lease negotiations on your behalf, in this way ensuring that your interests are properly protected prior to entering into a commercial lease agreement.