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 lease agreement:

  • Length of lease
  • Rent
  • 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 in time.

Rent

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 years.
  • 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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