Deciding to rent a commercial property for the first time is a big step for any business and shows that the business is moving in the right direction. However, taking out a commercial lease is a huge financial investment and commitment and there are plenty of things to think about when making the decision to rent. If you’ve never done it before, then it can be quite a daunting experience.
In order to protect your business, it is vital that you make sure to negotiate a lease that works for you and your business. If you skip this, then you might find yourself stuck in a commercial lease agreement for a number of years, when your plan was to potentially change locations after 2 or 3 years. In order to avoid any problems with your long-term plan, here are some things that all tenants should know about commercial leases.
When you rent any type of commercial property, especially one with a long lease, then you will be subject to regular rent reviews from your landlord. These typically take place every three to five years. There are different ways in which a rent review can take place, however, the most common way is through an open market rent review, which allows the commercial rent to be set in line with the market conditions at the time of the review. However, despite this, rent and lease reviews often either remain the same or increase slightly depending on market conditions. Before you agree to a commercial lease, be sure to check
Terms of Lease
Whilst it may sound straightforward, it is absolutely essential that the length of your lease fits in with both your long and short term plans for your business. It is important to plan ahead, particularly if there are restrictions on your lease and whether you are able to break or underlet the lease once you have signed. If you are thinking about your business in the future and know that you want to relocate your business in a few years, or are interested in buying your own commercial premises, then signing a long term lease is probably not the best option to agree to a lease that is 10 years plus.
Repairs and Insurance
With most commercial leases, it is your responsibility as the tenant to pay for any repairs and premises insurance. What repair work is expected from you as a tenant will be outlined in your lease, but it is important to know that repair clauses are one of the most frequently contested aspects of commercial property and leases, so it is important that you understand what you may be liable for in terms of damages.
Some landlords may have a schedule of condition in place, which is a survey used to protect both landlords and tenants by outlining and agreeing to the state of a property and any potential repair works which may be required during the lease, at the beginning of a letting. By having a schedule of condition in place, this provides a benchmark for which the condition of the property, land or structure can be assessed against and can help with any future claims or repair obligations.