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Things to consider before signing that lease!

Our last article advised a guarantor might be required to secure leased premises. Today we address other issues that arise when a lease is being considered. If a Lease is the way forward then you should think about at the very least the following 10 points ….. and there will be more.

  1. How long a lease? It can be as short as 6 months or as long as 30 years. The longer it is the greater the burden which a new business may not want. On the other hand established businesses may seek the stability of a long lease because it means they don’t have to move often! You can have a long lease but with “break” clauses. These can mean higher rents but you can then end the lease before the expiry of the term if the premises are not ideal.
  2. What space does the lease cover? Check the lease plans carefully to ensure you are getting what you want. Also will there be any shared space?
  3. Who will be named as the tenant? Will it be individuals or a company. If a company the landlord will want some sort of guarantee to ensure all lease obligations including rent are complied with.
  4. Is the rent a fair open market rent? Can you negotiate a rent-free or a reduced rent period? Will the lease include any rent reviews and will they upwards only? A landlord may want to review the rent annually. A surveyor will be in a position to negotiate terms for you. He should be independent, that is acting for you and not for the landlord.
  5.  What is the state of the premises? The landlord may want the premises put back in to a certain condition when the lease ends? How   do you prove the starting condition when the lease ends given that may be years later? Are there photographs?

Is there a schedule of condition? Who will be responsible for repairs? Internal repair may be the responsibility of the tenant. The outside and structure may be down to the landlord. What about maintenance of shared space? At the end of the lease a Schedule of Dilapidations may be handed to the tenant setting out the repairs the landlord considers must be done by the tenant. That obligation can be very costly so think of it at the outset.

  1. What business can you do in the premises? Does the class of use allow you to run your type of business from the premises?
  2. Will you be able to advertise your new business by putting up signs on the exterior of the building? This might be critical for the new kid on the block!
  3. What happens if you cannot afford the rent? Can you sublet part of the premises to get some income in? Can you assign e.g. sell the lease?
  4. What happens at the end of the lease? Do you have to leave or do you have a right to renew your lease on existing or similar terms? Business tenants have the right to renew under the Landlord and Tenant Act 1954 unless that right has been expressly excluded.   
  5. Obtain legal advice BEFORE you sign a lease!

Whatever stage you are at please contact our Litigation & Dispute Resolution Team for advice on 02476 387821 and ask for Manjit Kaur-Heer or Lorraine Walker. Alternatively email them on mkaur-heer@willsonslegal.co.uk or lwalker@willsonslegal.co.uk