Three things you should know before signing a commercial property lease

A commercial lease should offer balanced protection for landlord and tenant, but many properties and leases contain potentially painful features.

You’d be surprised how many businesses sign off on a lease – even for six figure rents – without ever reading through the terms.

People have come to think of them as standard documents, but they are not. Properties are as different as businesses, and who’d buy a business without reading its accounts?

The main issues appear quite simple, and perhaps that’s why they’re often overlooked, but when you consider the implications it quickly becomes apparent that the details need careful checking.

It’s important to make sure you understand all the terms of the lease and know the right questions to ask about the property and its condition before you move in. After that, you can do a better job of amending the lease to better represent your needs.

How to do the due diligence

Here are our top three tips for getting it right from the outset:

1. You do have a contract, don’t you?

Firstly, make sure you’ve got a detailed written lease on the property. A word of mouth assurance and a handshake are not enough.

In a perfect world you might be fine – but if ever any disputes arise over rent, repairs, damage, or contamination – you’ll have lawyers for each side slugging it out over who is responsible for what. Inevitably it will be disruptive, distracting and expensive – so make sure you get it all tied up at the outset.

2. Do you know what you’re getting into?

You’ve been to view the property, but have you uncovered all its dirty secrets?

Condition and compliance are two of the most problematic aspects of a commercial property transaction as they conceal so much potential for disruption and expense.

You need to know about all the issues concerning the building and the site. You can get some of the answers by simply asking the landlord’s solicitors about condition and compliance including any prior contamination of the site and compliance with regulations.

But you should also consider having detailed searches done on the property which will highlight other environmental issues and responsibilities as well as any planning history that might restrict your expansion or enforcement notices that would prevent your proposed use.

If the property is already in disrepair, a tenant should also take advice with a view to limiting their obligations to repair.

3. Does your lease provide adequate protection for your business?

A lease commits landlord and tenant and sets out the terms of that commitment. Looked at from another angle, it’s a kind of insurance policy making clear what happens in a range of possible events.

Your lease should enable you to suspend the rent and any service charge if the property cannot be occupied, but they don’t always include that provision. Equally, if the property is damaged by an uninsured risk as to prevent occupation then, unless the landlord agrees to rebuild at their own cost, you should have the ability as tenant to terminate the lease and seek a new permanent home for your firm.

If you don’t have such clauses in your lease or if you have no detailed written lease at all, the whole field is wide open, and you’ll have to negotiate everything after the event.

That goes for any aspect of the tenancy.

There’s no end of potential for disagreement, which naturally some lawyers like because it means bigger bills, but why let them do it?

Get some advice early on and protect your business from distracting and expensive difficulties later.

For clear, straight-talking advice on any commercial property issue contact Kieran Lowe on 01245 673072 or klowe@aquabridgelaw.co.uk