Considerations For Tenants Entering Into A Lease of Business Premises

A lease for commercial premises can contain pitfalls that the unwary business owner can be caught out by. Here we will briefly explore the issues that potential tenants should consider when signing up to a lease.

How much will a lease cost?

A key consideration is affordability and it is important to be clear about all potential costs. This goes further than just the main rent agreed with the landlord. Additional costs such as any service charges or insurance costs passed on by the landlord should be investigated to ensure you have a full picture of your outgoings.

For a longer term of lease it is not unusual for a landlord to want to increase the initial rent at set points in time. Any potential for the rent to increase during the lease term needs to be understood including the frequency and calculation of the new rent.

Can you end a lease early?

Many tenants of longer leases would benefit from having the option to end the lease early if needed. Without this right you will be contractually tied into the lease for the whole of the agreed term. Consider the frequency of the right you would need and whether you would be happy for the landlord to have a corresponding right.

Sharing occupation of a leased property

A commercial lease should clearly set out a tenant’s ability (if any) to sell its lease to someone else, sublet or share occupation of the property with a third party. Unless this is a key part of your business model you may not give it much thought when signing up to the lease however, circumstances can change over time and it is advisable to clearly understand your options to assign, sublet or share occupation of the property.

What is your repair liability?

Repair liabilities have the potential to be costly and consideration of this during negotiation of the lease can help avoid unexpected repairing costs. Repairing obligations should be properly understood and appropriate to the property and the length of the term.

Issues surrounding leases of commercial premises are complex and these are just a few of the points that should be considered.

Always seek advice before signing a commercial lease

The lease you are signing may be the first you have encountered. Real Estate lawyers are reviewing and drafting leases day in day out, so will know what elements will benefit or harm your tenancy. It is therefore important that you seek advice before signing any lease for business premises.

The experts in our Real Estate team can help you with this specialist area, so please contact a member of the team for advice.

About the author

Christopher Hey is an Associate in our Sheffield Real Estate Team. Please contact Christopher for more information about the issues discussed in this article, or for advice on any other Commercial Property or Real Estate issues you may have.

For more advice on this topic or related matters:

0114 3496988