If your commercial lease is due to expire, you must decide whether you want to remain in the premises or vacate. If you wish to stay, you are perfectly entitled to renegotiate the terms of your lease. Your landlord may not agree to every request, but if the market conditions are right, you will have some bargaining power. And anyway, if you don’t ask, you don’t get.
Here are some points you may want to consider when renegotiating the terms of a commercial lease.
Look for greater flexibility
No one knows what the future holds, particularly when it comes to business. Therefore, it can be beneficial as a commercial tenant to incorporate an element of flexibility into your commercial lease. That way, if your circumstances change, you can terminate the lease more readily. There is nothing worse than being stuck in a premises that either does not serve your needs, or you can no longer afford.
To allow for greater flexibility, be sure to request frequent break clauses in your commercial lease. A break clause permits you to end the lease at specified times, before the full term of the lease has expired. You can also ask for terms and conditions to be included that allow you to sublet or transfer (known as ‘assign’) the lease. This gives you greater options if you want to generate more income or vacate the premises.
You should also give thought to the length of the lease and what your preferences are. Previously, 25 year commercial leases were the norm. For some commercial tenants, this is favourable. For example, if you are a successful restaurant with a central London location, you might want the security of a longer lease. But if you consider the commercial premises to be a short-term arrangement, a 25 year lease will be too much of a commitment.
Consider where savings can be made
If your commercial lease is up for renewal, now is a good time to negotiate your rent, especially if the landlord is demanding a rent increase. You might even be able to request a rent free period, or a concession, for remaining in the property. This is more likely to be granted if the market is slow, as the landlord may want to keep the same commercial tenant, rather than run the risk of a vacant property.
If works need to be carried out to the premises, you could also negotiate a deal whereby you remain in situ, but the rent is reduced temporarily or waived. This can provide significant savings for a business, helping with cash flow. It is also beneficial for the landlord, as the necessary works can be completed, but a rental income can be drawn at the same time.
Limit your liability for repairs
Commercial leases typically place responsibility for repairs at the hands of the tenant. Your exact obligations will be determined by the wording of the lease, not by the law. Therefore, it is important to negotiate terms that are not too onerous. Otherwise, you could find yourself with a costly repair bill when you do eventually vacate the premises. This could be completely disproportionate to the length of your tenancy.
Also, you may want the freedom to make minor alterations to the premises, without having to get the landlord’s consent. Such clauses can be worked into the commercial lease. Again, you can protect your position by agreeing that the property will be returned to the landlord in the same condition as at the outset of the lease.
Speak to a commercial property solicitor
If you are entering into a new commercial lease, or you are renewing a commercial lease, contact us at Garner & Hancock Solicitors. We can review the terms of your commercial lease, helping to negotiate a favourable deal.