Many small and medium businesses are reporting business confidence and with it, a demand to relocate to larger premises is growing within Jersey.
While the astute entrepreneur or director is always wary in his or her business dealings to ensure that the product or service is best dealt with, there are a minority that do not devote the same amount of time and reflection to the matter of commercial premises. The focus being on price per square footage, not necessarily as to other factors which could have a significant impact in the future on your business.
It is generally a false economy not to engage an appropriate team of professionals to assist you. The old adage that you ‘don’t know what you don’t know’ comes to mind and is apt in this scenario. A commercial lease is not an insignificant venture and as such a number of issues legal and otherwise need consideration.
You want the new premises to work for your business and you need to have your eyes wide open when signing on the dotted line. Here are a few fundamental points to consider, (this list is not exhaustive):
Always agree fundamental terms in principle so that when you instruct your lawyer they have a frame of reference within which to work to.
You will 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 plan is to alter or add a different arm at a later stage.
For example, the use defined may be for a restaurant however if at a later stage you want to include a takeaway service you would need to check if there is an allowance in place for an off-premises consumption.
Altering the lease at a later stage could become costly and in the event, the alteration of use is not granted your business to could lose a stream of income.
Do not make the mistake of assuming that the stated use of the premises is comprehensive.
SME’s should be cautious when determining the length of the lease. If your business performs better than expected you may need to move premises. What happens if you don’t have any mechanism to sublet or assign the lease. Do you want to consider a break clause? Will this increase the rental? Locking yourself into a long term lease could prove difficult and expensive to terminate if indeed you can.
Dilapidation -disrepair of the property.
This is generally one area that tenants do not fully consider. When moving into your new premises the last thing on your mind is what will happen at the end of your tenancy. Depending upon your obligations you could find yourself paying a significant chunk of your hard earned profit to repair the premises. It is always advisable to employ an appropriate professional to review the condition and negotiate appropriate wording to protect you should there be issues as to condition. This may prevent potential costly disputes at the end of the tenancy.
Overall, the advice is to be wary about entering into a commercial lease without at least obtaining some general legal advice as to the implications. It could save you a lot of time and effort in the long run.
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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