Tenants – Avoiding the Pitfalls in your Next Commercial Lease

When you start a business, or have grown it to the stage where you need to move, the lease agreement on your premises can seem like a bit of a detail and can be locked away in drawer. You will certainly have plenty of other business issues to occupy your mind, but the detail is where the devil is.

There are many potential pitfalls for the unwary when they enter into lease agreement. Never assume that lease agreements are all much the same or a simple formality that can be casually overridden. Professional landlords and those employing managing agents will ensure that all lease terms are keenly observed and will take action where there are transgressed, which could lead to your lease being forfeited. Researching the details and history of the property you are planning to rent can save you some nasty surprises later on.

Here are just a few of the potential issues you could face:

A basic one (and one that’s surprisingly common) is that you may end up paying rent for space that doesn’t exist. The dimensions quoted on property details can be in some cases inaccurate and therefore you should always get them checked before signing.

Next, beware of a bargain rent. If you are taking over an existing lease, make sure you know when the rent was last reviewed and what it is likely to go to. Rent reviews cannot be abandoned and a landlord can have a go at implementing or resurrecting reviews that are many years old. We were once called in to help a new tenant where an outstanding rent review they were unaware of almost doubled the rent soon after they signed a lease.

Pay very careful attention to the repairing covenants. These terms can be difficult to interpret for people who are not used to dealing with them. A clause to ‘keep in repair’ will on the face of it mean putting the property into repair first. So don’t assume just because a property pay be awreck at the outset, that is how it is to be given up when the lease ends.

Also, make sure you are clear about what you can and cannot do with the building in terms of use, alterations, assignment and sub-letting. There will be conditions affecting all of these and it isn’t the landlord’s responsibility to explain them to you before you sign. Do next expect them to be able to allow a friend or another business with you to share the cost without the landlord’s permission and do not think that having a lease gives you authority to use it improperly or undertake physical changes.

If you are taking a lease with an option to break, consider whether you actually need one as it is likely you will pay a higher rent for the flexibility.  If you do have one and decide to exercise it do it properly with a lawyer and prepare well in advance.  Many such clauses carry conditions which seem trivial, however if they are not observed that will thwart your plans.

For offices and estates in multiple occupation it’s highly likely that there will be some kind of service charge payable. Would you know what is a reasonable charge? And are you 100% clear about exactly what the charge covers?

Lease agreements often run to over 60 pages and the language tends to be highly legalistic. Often there are implications behind the words that people without experience in the commercial property market wouldn’t appreciate. Working with an experienced commercial property agent to identify a suitable property and negotiate the lease is an investment that will clarify and limit the risks you face.

Looking for new leasehold premises? Or do you have an issue or dispute with an existing lease? The experts at Hicks Baker are here to help you, contact us today on 0118 959 6144 or visit our website for more information.