It’s important when entering into a new or renewed commercial lease that you review all terms and conditions and fully understand where responsibility for certain aspects of the building, property, and lease lies.
Opting to lease a commercial property is a significant decision, investment, and commitment, so it’s vital that you understand all key areas of the lease.
Working as B2B debt collection professionals, we help with the collection of any outstanding arrears, ensuring these don’t get out of control, and we help businesses to ultimately keep their cash flow flowing.
In this post, we list some of the key considerations when signing a commercial lease and areas to consider before placing your signature on the dotted line.
Commercial lease considerations before signing
Before signing a lease agreement, make sure 100% that the property in question meets all of your business requirements and has the right protections in place.
A commercial lease is designed to help protect both parties. For businesses, it can help protect you against unexpected costs, support disputes, and provide information on how to cancel your lease early if required.
Before jumping straight into signing your new commercial lease, as you’ve been wowed by the property in question, make sure to check and ensure the lease itself covers:
What can you actually use the property for, and does this meet the nature of your business and its requirements?
Who is responsible for any alterations, change-of-use requests, or repairs? What are, if any, the restrictions? What are your repairing obligations compared to the landlord?
What is the payment schedule, and does the lease outline the consequences of late payment, for example, will late payments be passed to a business debt collection agency?
Are you responsible for paying service charges? If so, what do they cover? The service charge should be factored into your budget when evaluating commercial property.
What is the length of the lease term? Three, five, or ten years?
How is rent reviewed? Is rent fixed? Changeable to follow the open market?
Is there a break clause built into the lease agreement? For example, if your business circumstances change and you need to get out of your lease early, is this possible? What are the financial implications? Typically, landlords will require a minimum of six months’ notice, which will most likely come with conditions, and all rent must be up to date.
Commercial lease signing
Carrying out surveys is the first step before signing a commercial lease. You must understand and know the property’s condition, including any defects and disrepair.
Early detection can help prevent unexpected repair costs and allow negotiation over who is responsible for carrying out such repairs, avoiding disputes further into the lease agreement.
Do you have security of tenure? Under the Landlord and Tenant Act 1954, a tenant can renew their lease on effectively the same terms as the current ones if this is a key consideration built into the original agreement.
Are you able to transfer or sublet the property? Do you require consent? Are you subject to certain conditions? Note: if you sublet, you are still liable for the original lease. However, if you transfer, you will transfer all rights, responsibilities, and obligations under the lease agreement to the new tenant (approved by both parties), who will then assume responsibility for the new lease.
Understand the type of lease you are entering into, as different lease types often entail different expenses. Short-term leases can be more costly but do offer flexibility, whereas long-term leases are usually associated with lower rent costs and provide businesses with stability.
An essential aspect for businesses to check in their lease is whether exclusivity and non-compete clauses are included. These clauses can be essential for businesses as they prevent landlords from renting out nearby spaces to your competitors. However, a word of caution: non-compete clauses can limit your business activity.
We would always recommend that you have your commercial lease checked over by a professional who can help identify any potential risks, now and in the future, any hidden costs you weren’t made aware of, and any unfair terms. Negotiating better conditions for you, tapping into their specialist expertise and knowledge can provide you with peace of mind and confidence when signing your commercial lease agreement.
Commercial collection agency
Helping to support business debt collection, our team is on hand to help you manage your cash flow, collect on outstanding repayments, and ensure prompt payment through robust business-to-business debt collection processes and procedures.
Entering into a commercial lease and choosing the right commercial property for you is a significant step, so it’s vital to check everything and then…check again.
For further information on our services and how we can help, contact us on +44 7860 197 476