Business Leases – What you need to know as a tenant

Business Leases – What you need to know as a tenant

As a tenant, a business lease is likely to constitute one of your biggest outgoings. Entering into a lease recklessly without taking the correct advice may create a liability for years to come that severely impacts not only on your business growth but possibly your business surviving.

Your ability to negotiate terms of a lease will depend on the rental market at the time you take the lease, but you should always take advice upon your liability under a lease before you enter into it. Once the lease has started, it may be too late.

There are some key areas of a lease that as a tenant you must always consider.

Security of Tenure

As a tenant you may want to have a lease that is protected by the Landlord and Tenant Act 1954, which ensures you have a right to renew the lease automatically when the old one comes to an end. This is called security of tenure. A landlord can only object to you being granted a new lease on limited and specific grounds.  It is essential that you seek legal advice so you understand the full consequences not having a lease that has security of tenure. As a tenant you do not want to find the perfect location for your business and spend thousands of pounds fitting out the property, to then be required to move when the lease ends.

Rent

As a new business can you afford the rent? Rent free periods are common in commercial leases and you could ask your landlord for a rent free period whilst you undertake a fit out of the property. A rent free period at the start of a tenancy can ease cash flow, especially if you are a new business.

Break Clause

You may wish to negotiate a break clause to allow you to end a lease at a certain time before the lease expires.  For example, should you commit to a ten year lease, you may wish to have a break clause to end the lease after five years. The precise terms of exercising any break clause must be observed, otherwise the exercise of the break clause may be invalid.

Transfer/Assignment

You should ensure that you are allowed to transfer (assign) the lease to another party. You may need to move to bigger premises or relocate your business at some point. Should the lease not have a break clause or provide you with the ability to assign it, you are stuck with the lease and the liability to pay the rent to the landlord for the remainder of the term

Repairs

Most leases are full repairing leases. This means that once you enter into the lease, you are liable to maintain property and undertake any repairs that become necessary during the lease. You may even be required to put a property into a better state of repair and condition at the end of the lease, than the property was when you took up occupation.

You may be able to negotiate with the landlord that you will keep the property in no worse repair than the condition it was in when you first took up occupation.

Failure to correctly observe a repair clause may leave you open to a dilapidations claim from the landlord at the end of the lease, which could be very costly to your business.

Our commercial team at Woollcombe Yonge have many years of experience in dealing with leases and can offer you the best advice on how to approach any situation.  Contact Gary Burns 01752 827948 or gb@wysolicitors.co.uk.