What You Need To Know About Commercial Property Leases

So after an extensive search for a commercial property, you've finally found the ideal workspace in the right location. Now you need to sign the lease. If you think the hard work has already been done, think again.

When it comes to signing the lease on your business premises you need to be just as rigorous as you were in your property search – if not more. You can’t afford to commit yourself to the wrong deal because your property costs are likely to represent the largest outgoing on your accounts sheet. So make sure you don’t get caught out and sign away the future of your company.

Ideally, you should make sure the lease is looked over thoroughly by a reputable lawyer specialising in commercial property.They will be able to spot any potential problems and find areas for improvement or negotiation. But before you go to the expense of recruiting legal assistance, you need to read through the lease thoroughly yourself – and that means every word of it. Here are some points to consider:

### Lease length

Make sure the length of the lease suits you and your business. Commercial leases can range from a few months to over 15 years, but the average nowadays is probably ten years. Find out when you have the right to end the lease – this might be after the first five years. Also check whether you will have the option to sign a new lease when the original agreement expires – otherwise, you could be forced to move.

### Rent

Can you really afford the rent? If the affordability of renting the premises depends on optimistic rather than realistic projections for your business, perhaps it would be wise to pause and reflect on whether there are more suitable options for you. You also need to think long term – how often will rent be reviewed? It’s typical for leases to stipulate rent reviews for every three to five years. Bear in mind that it’s unlikely the rent will be revised downward, regardless of market trends. Also find out how and when rent is to be paid, and whether VAT is included.

### Service charge

The rent isn’t your only concern regarding affordability. You might also have to pay a service charge to cover expenses such as general maintenance, property management and insurance costs. Make sure you know exactly how much this will be and how often it will be reviewed. Ask for a breakdown of the costs that make up the bill.

### Repairs

The majority of commercial leases are Full Repairing & Insuring (FRI) leases. This means the tenant is responsible for repairs and maintaining the property. However, you need to make sure the building is in a fit state to begin with. Under the lease you will be liable for maintaining the property to a high standard, and if it’s in a shoddy condition when you take up residence having signed the lease, you’ll pay for any necessary work out of your own pocket. So if repairs and maintenance are needed before you move in, negotiate for the landlord to take care of them as part of the lease agreement.

### Insurance

The landlord usually pays this and then recovers the cost through the rent or service charge. However, you need to be sure you don’t have a separate liability so look for clarity in the lease agreement.

### Use of property

FRI leases usually include restrictions on how the premises can be used – so make sure your line of business is viable for the property. You might require planning permission, which the landlord would have to apply for.