How to negotiate terms
Your business lease is going to be one of the biggest overheads
you have so it's important to get the right premises on the right
terms. This guide covers the three key areas to get right in any
- Length of lease
- Maintenance and repairs
Length of lease
You can negotiate on lease terms, typically short term leases
run for three to five years and long term leases for 10 years.
Breaking a lease can be costly; you could lose your deposit and you
could even be sued by the landlord. Remember the longer the term
the greater the value to the landlord and the better negotiating
position you're in.
- If you're concerned about the length of a lease you could ask
for a 'break clause' to be inserted. A break clause allows the
tenant to give notice to terminate the lease at a particular point
It's worth employing a specialist to negotiate on rent (eg a
commercial valuer); they should be in a good position to know what
rents have been achieved in the local area. They may even be able
to negotiate a rent free period if the market is slow.
- Check any rent review clause carefully, it's this clause that
allows landlords to change the rent, typically every three or five
- Watch out for contracts that include an 'upward only' rent
review clause as this means your rent will never go down, even if
rental prices in your area drop. Negotiate with the landlord on any
'upward only' rent arrangement. If the market in the sort of
property you want is poor you should make sure there's some kind of
ceiling on the new rent when it's reviewed.
Maintenance and decoration
One of the most frequent sources of property litigation is
liability for repairs. Working out who is responsible for
redecoration and repairs can be a tricky issue and it can be an
expensive overhead, especially in older properties. Most leases
will put the onus on the tenant to cover these costs and they often
specify that the landlord is able to carry out the work at your
expense if it hasn't been done to their satisfaction.
- It's important to arrange a 'schedule of dilapidations' which
lists all the deficiencies of the building. Landlord and tenant
have to agree this list and the landlord has to agree that the
tenant is under no obligation to improve the building beyond the
state set out in that schedule.
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