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Considerations before signing a commercial lease

Considerations before signing a commercial lease

Whether you are looking for your first commercial work space or re-locating, the lease you sign can have a significant impact on the success of your business. But before you sign, there are a number of considerations that will ensure the lease reflects your needs now and into the future.

Timing – allow enough time to agree your lease, especially if you are an international business seeking to set up a new UK base. The due diligence process and documentation involved in the UK property market can take time, so ideally allow at least six to eight weeks to negotiate terms of the lease and get the necessary paperwork signed. Also bear in mind that if third parties need to be involved such as banks or superior landlords, the process can take longer.

Flexibility – this is a critical consideration when agreeing a lease. Ensure the lease is granted for the right period of time and that you anticipate how long you will need the workplace for from the outset. Depending on the success of your business, you may also need to safeguard against the property becoming either too small or too big to meet your needs.

This can be achieved through negotiating appropriate ‘alienation’ provisions, which enable you to transfer the lease (assign), sub-let the lease or share occupation of the property with another business. Subletting or sharing your space could provide your business with revenue, so choose your property carefully and consider how you could exploit it if your circumstances change.

It is also possible to include break rights in the lease, which give you the option to end the lease at appropriate intervals.

Reinstatement – tenants like you will have repair and reinstatement obligations as part of your lease, but it is important to clarify what you are signing up to and what you will be required to do at the end of the term of the lease. In some cases, and particularly if you are leasing a space which is in a good state of repair from the outset, you will have to put the property back in the same condition you took it in, including removing any items or alterations. You will also be required to keep the property in a state of good condition and repair throughout your tenancy.

If you’re leasing an older property or depending on the condition of the property, you should get advice on potentially limiting or modifying your repairing obligations. A common way to limit your repairing obligations is by reference to a photographic ‘schedule of condition’ which provides evidence of the condition of the property at the time you took the lease. This is then used to determine the extent of the repair works you must carry out during and at the end of the term.

The cost of, and liability for, repairs throughout the lease and at the end of the lease (dilapidations) can be expensive so steps should be taken to mitigate these costs.

Incentives – if you have been offered an incentive to lease the property, be careful it does not distract you from the due diligence activity you must undertake. Tenants are often offered rent-free or reduced rent periods and other similar incentives. If you have agreed anything with the landlord, make sure this is dealt with in the formal lease documents. We can talk you through the different options for dealing with these incentives and how best to protect your position.

Conclusion – signing a lease is a big step and not one to be taken lightly or without the necessary advice of an experienced commercial real estate lawyer, such as the ones you will find here at Newmanor Law. If you are considering signing, ending or re-negotiating a commercial lease, please get in touch and take advantage of our vast experience, for a fixed fee.