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What to Ask When Negotiating a Lease

Negotiating a lease can be a tricky business because there are so many different variables that it is incredibly important to get it right the first time due to the costs and long-term implications involved. Should you sign a long term lease and then find that the premises aren’t suitable, then you will find yourself in a real pickle as it can often be difficult to extricate yourself from a commercial lease without costly penalties. 

This means you have to thoroughly do your homework and know what length of contract you are happy to agree to. Knowing whether a premise is suitable is not easy and requires that you ask many questions and receive appropriate answers before you can be sure that you have found the right property. To make your life as easy as possible, we have compiled this handy guide to what to ask when negotiating a lease, so read on to find out more. 

A rent-free period

As with many things in life, if you don’t ask, you don’t get, so when negotiating a new commercial lease, it is advisable to ask for a rent-free period at the beginning of the lease. This can be advantageous for both parties because it gives you the best chance of early success without overheads hanging over you, and it also makes sense for the landlord because it is in their interest for you to succeed. After all, they don’t want new tenants every six months. Furthermore, they won’t want to face the prospect of paying business rates themselves, and given that the current state of the rental market is in freefall, there is a very high chance that they will agree to your demands. 

Why the previous tenant left

This is one of the first questions that you should be asking because you can find out an awful lot about a property from why the previous tenant left. Experts from advise that if the previous tenant had trading difficulties, it could be down to lack of footfall in the location, or possibly that the retail unit is in bad shape and suffers from damp, for example, and this may be putting off customers. In reality, you don’t exactly know what you might find out, but knowing something about why the previous business failed is better than not knowing anything, so it makes sense to ask probing questions. You may find out something that raises the alert signal, and then with this information, you could dodge a bullet by not signing a lease.

A break clause

Asking for a break clause is a sensible way of ensuring that you can leave the premises if your business doesn’t take off. Often landlords will require a personal guarantee when signing a lease, especially if your Limited company has no financial history or assets. This means that you personally will be liable if you cannot pay your rent, which can have far-reaching consequences. If you are aiming to sign a 5-year lease then, it is worth having a one-way release clause in the lease to leave the premises at the end of each year. This allows you to be safe in the knowledge that you have reduced your liabilities if the business doesn’t work out for you. 

Ask what your repair obligations are

Many landlords will try and include an obligation to repair both the inside and the outside of a property in a lease. This can be extremely demanding on the tenant and should be avoided at all costs. Repairing the inside is normal, and you will be expected to return it to the condition that you found it, but you should not be responsible for the outside, save for your own signage. If the landlord insists, make sure that there is a Schedule of Condition included in the lease so that the exact state of repair of the property is noted, and you will not have to be responsible for damage caused before you moved in. 

As we have learned, there are several pertinent questions that you should be asking when negotiating a lease. From the outset, you should always ask for a rent-free period so that you can try and build your business early, and a break clause will limit your liabilities should your business fail. Find out why the previous tenant left, as their reasons could apply to you, and you may decide not to sign a lease based on this, and make sure that repair clauses are reasonable and you are not expected to pay for the previous tenant’s damage. If you follow this guide, then you will be well placed to find the perfect property for your business.