The decision to rent a commercial property is usually a big financial commitment and you don’t want to get it wrong and end up regretting it.
Knowing your rights, your responsibilities and any potential issues is crucial if you want to create a stable and successful business.
We understand how intimidating it can be to sign a lease and have put this brief guide together to help you avoid the pitfalls.
Before you even entertain the idea of leasing a business premises, you need to look at where it is located.
This may seem obvious, but some businesses will rely on passing trade. So if there is no-one passing by, then you won’t get that drop-in trade. It may appear to be in the perfect locale, but it is worth checking that your potential customers still visit this area.
What if it is a high street location and all the shoppers now go to the newly built shopping mall? A little research goes a long way. Ask other business owners, do your due diligence.
5 Things to Check
- The length of term of the lease suits your needs.
- Check what the property is legally allowed to be used for.
- Who is responsible for any repairs?
- Can you sublet or assign the lease to another party?
- Is it easy to break the lease if you need to?
The length of the lease will be something that is fundamental when making your long and short-term plans. Getting the length of lease that suits your needs is a key element. You may want to go for a shorter lease in the first instance to test the waters and see if this is the location you want to remain in.
The Landlord and Tenant Act 1954 states that the tenant has the right to renew their lease at the end of the term unless the landlord can establish one of the statutory grounds to oppose it. This means that you, as the tenant should be able to remain in your business premises if your business is successful and you wish to stay.
However, be aware that some landlords will ask you to give up this right to renewal by signing an ‘excluding lease’. This will exclude some of the specific terms within the act that removes your right to as the Courts to grant a new lease if the landlord declines your renewal request. So check the clauses, or better still, get a solicitor to check them.
Property Use Clause
When you lease a business property, you want to check that you have the right to conduct your business there, ie it is fit for your required use. However, you may wish to expand your business or change it at a later stage. So it is worth checking that the permitted use of the premises has a wide enough scope to incorporate any expansion plans you may have for the future.
It is the responsibility of the tenant to ensure you have all the correct planning permissions and licences necessary to use the property specific to your business needs. Carrying out a search will reveal what your liabilities are in terms of planning. The usage of the property and any breaches of permissions will fall to you.
Who Is Responsible for Repairs?
A landlord will usually require the tenant to have a full repair covenant included within the lease. This means that you will be responsible for any and all repairs to the property. It also means that no matter what state the property was in when you took occupancy, you have the responsibility to return it in good condition.
According to Moyen from Manchester based IntegraSolicitors “We would advise that you try to negotiate a clause stating that the property will be returned ‘in no worse condition’ than it was when you took up occupancy.”
Assignment and Subletting
Transferring, or assigning the lease to another tenant or subletting gives you the flexibility to vacate a property prior to the end of your lease. However, most landlords will put restrictions in place against this. You will want to look into this clause before entering into the lease so that you know exactly what is expected and negotiate something different if required.
Breaking The Lease
Unfortunately not all businesses become a roaring success, and you may find you need to vacate your property before the end of your lease. Or you may just want to move to bigger premises. What ever the reason, it is not always easy to get out of a lease unless you have a break clause.
Having a break clause added at the end of the lease can be beneficial if you need to leave your premises ahead of the original end date. However, it is important to have these clauses fully checked by a solicitor. It is easy to get caught out and not comply with the conditions if you don’t fully understand them. Your landlord may only grant you a break clause if he/she can have one too. If a landlord has a break clause in their favour, they could easily serve you notice at any given time.
We would always recommend that you seek legal counsel before entering into any contract.