When considering moving into new commercial premises there are plenty of factors to consider. Most tenants assume that once the commercial premises has been found the negotiation of the lease is a small matter. However, one of the most important aspects when moving into a new premises is the commercial lease.
There are many pitfalls in a commercial lease and here are a few fundamental points to consider:
You need to ensure that the lease allows you to use the premises for your intended purpose. Although this sounds simple enough it is an easy trap to fall into especially if your business is to alter or add a different arm at a later stage.
For example, you may open a retail shop and as your business progresses you may want to add a café. This may not be possible without renegotiating the lease and of course obtaining the appropriate consents.
Another point to keep in mind is not to assume that the stated use for the premises is comprehensive. For example the use defined may be for a restaurant, however, there may not be an allowance in place for off-premises consumption.
For a new business, in particular, there are many risks and uncertainties. Therefore it would not be advisable to initially commit to a long lease as once entered into it is difficult to exist prior to its termination without paying a penalty.
You may want to get a short term lease which can be renewed.
It is always a good idea to have a break clause which allows you to terminate the lease at certain intervals prior to the end of the lease.
If you are liable for any repair work (internal or external) you should ensure you have checked whether the building is in good repair and raise any concerns in writing. It is a good idea to document the state of the property when you move in and agree it in writing with the landlord, otherwise you could be liable for refurbishing it at a later date.
You also need to be aware that you will be responsible for inherent defects which includes any design faults in the structure. Therefore if you are taking a long lease it would be advisable to have a detailed survey before signing it.
Dilapidations mean disrepair of the property.
Dilapidations responsibility should be clearly set out in the lease, stating both the landlords and tenants responsibilities.
The lease should clearly state whose responsibility it is to repair the dilapidations on termination of the lease. We would strongly advise you to obtain a condition report in relation to the premises at the commencement of the lease to prevent any potential disputes at the end of the tenancy.
In addition be cautious that the landlord does not exempt him and/or herself from all liability and as a result does not thrust a full repair liability clause on to you, the tenant.
A commercial lease is legally binding, with pitfalls to place the burden on the tenant, therefore we would always recommend you to seek legal advice prior to signing a commercial lease.
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The information and opinion expressed in this briefing does not purport to be definitive or comprehensive and are not intended to provide professional advice. For specific advice, please contact Parslows, We are not responsible for, and do not accept any responsibility or liability in connection with, the content of this document or any reliance upon it.