TOP FIVE TIPS…on getting a good deal on a commercial property lease
1. Rent Free Landlords are having to accept that commercial tenants are more scarce than they used to be and they are therefore willing to offer incentives to prospective tenants. Rent free periods are the most common way of doing this and can give you valuable time to get your business up on its feet.
2. Schedule of Condition A lot of leases contain an ‘open ended’ repairing obligation for tenants, which can require you to improve the state of the property. Negotiate that your liability is limited by reference to the schedule of condition showing the state of the property on day one.
3. Rent Deposit Rent deposits are common and provide that your landlord will hold a lump sum to cover any tenant default. They are normally not refundable until the end of the term. Negotiate that these funds should be released earlier, whether it be at a fixed point in time or when a financial goal is achieved (ie turnover reaches three times the rent); do you really want that cash to be tied up until the end of your lease?
4. Rent Reviews Rent reviews are normally done by reference to the open market and can leave you open to potentially large increases (especially if you have negotiated a good initial deal). Consider whether reviews by reference to inflation may give you a better deal. With inflation linked reviews you are able to track increases and you will get less of shock when it comes to review time. Do note that this type of review will always lead to increase but may reduce the extent of the increase.
5. Break Clause A long lease term can be as much a burden as it is a benefit. Negotiate the inclusion of a tenant’s break clause to permit you to end your lease early if needs be. Remember you are liable to pay rent for the whole term whether or not your business is making money!
We are very much in a tenant’s market, so don’t be afraid to negotiate; the worst a landlord can do is say no… If you want some specific advice or guidance, please contact us.
