Starting a new business can be an overwhelming task, especially when it comes to finding the right commercial space to set up shop. Negotiating a commercial lease is a crucial step in this process, and it’s important to approach it with caution and strategy to avoid potential pitfalls. Here are some key tips to keep in mind when negotiating a commercial lease for your new business:
Do your homework and avoid hasty decisions: Before committing to a commercial space, make sure to thoroughly research the property and speak to other tenants in the building. Take the time to understand all the terms and conditions of the lease to avoid any surprises down the line.
Negotiate a comprehensive set of terms: When negotiating the lease, make sure to include all your requirements in the “heads of terms” document. This is your chance to negotiate the best deal for your business, including lease duration, rent amount, maintenance responsibilities, and any special provisions.
Consider which entity is to take the new lease: Think carefully about whether to take the lease in your own name or in a newly incorporated limited company. Taking the lease in a company’s name can protect you from personal liability for tenant obligations.
Push for a rent-free period/appropriate rent incentive: Depending on market conditions, you may be able to negotiate a rent-free period or rent incentive to help offset the costs of fitting out the space.
Flexibility, termination, and ability to ‘deal’: Look for flexibility in the lease terms, including break clauses that allow you to terminate the lease early if needed. Negotiate the ability to sublet part of the space to reduce your liabilities.
Consider repairing liabilities and protect against onerous obligations: Make sure the lease doesn’t impose overly onerous repairing obligations on you. Negotiate a schedule of condition to document the property’s state of repair at the start of the lease.
Consider reinstatement when making alterations: Obtain the landlord’s consent for any alterations to the space and be aware of any reinstatement obligations at the end of the lease.
Seek to agree a cap on additional charges: If the lease includes common area maintenance costs, try to cap your contributions to avoid unexpected liabilities.
Be aware of SDLT and additional post-completion costs: Understand any stamp duty land tax liabilities and registration fees associated with the lease.
Take professional advice: It’s always wise to consult with a reputable commercial solicitor to ensure your interests are protected during the negotiation process.
Negotiating a commercial lease is a critical step for any business looking to secure a space for its operations. By carefully considering these key points and seeking professional advice, you can negotiate a lease agreement that meets your business’s needs and goals while minimizing risks. Remember to thoroughly review and understand all lease terms before signing on the dotted line.