When you are taking a lease, whether of a shop, an office, a pub or an industrial estate, the lease terms can often be overlooked whilst you deal with the bigger issues of the deal. You need to keep focused on the lease terms as well as the other purchase terms, as these can have a long term effect on the profitability of your business.
So where do you start? If there is an agent involved, there will be some Heads of Terms issued. These are to be agreed between you and whilst they do not commit you to taking a lease on those terms, trying to change these terms later can cause a delay and additional costs. Sometimes they can impose an obligation on you to pay costs in certain situations. Do not agree to any Heads of Terms without talking to us first. Many of the terms in the Heads of Terms are negotiable but we often see cases where onerous terms have been agreed by the Tenant as they believe they are standard terms. Getting these right is the first step in agreeing a lease for you that will work for you and your business.
Some questions you might want to consider are these:
- Exactly what is the property? This may seem obvious, but if it is part of a building, do you get rights over other parts? Is there a shared toilet, kitchen or access? Where are the bins stored? Don’t assume that you get the yard at the rear or a right to put tables out at the front. If it is not included in the lease you do not have the right and it is irrelevant what a previous tenant may have done.
- What condition is the property in? Even with a short term lease (term means the length of the lease) this is important. There are several levels of repairing obligation that can be included in a lease and if you accept a good and substantial repairing obligation, you are obliged to put the property into a good as new condition, even if it is far from that when you take over the lease. You do not lose this responsibility at the end of the lease. The Landlord has the right to sue you for the cost of putting the property into the state of repair required by the lease. This is called Dilapidations. Consider having a surveyor report on the property and cost up any repairs. Consider reference to a schedule of photos evidencing the current condition. Talk to us about other options before you agree to this.
- What do you want to use the property for? Will you need a change of use or planning permission in order to do this? Do you need any other Licenses to run the business? If you haven’t yet got these, talk to us about an Agreement for Lease conditional upon these requirements. Do you need any specific rights?
- Consider how you are able to pay. A Landlord may ask for quarterly in advance but you may wish to ask to pay monthly in advance. There is a balance to make between getting the best deal for your business and risking the Landlord wondering if you have a viable business and will make a good Tenant. If you have references and a Guarantor rand a trading history then the Landlord may look more favourably on such a request.
- How long a lease do you want? Consider the ability to sell your business on in the future with the right to continue to use the property. You should have a right to assign the lease to someone else (that is transfer it to someone else) and if selling on your business in the future you will need to show the buyer that they have a right to continue to occupy the premises. However there may be a right to renew the lease on similar terms (other than if the Landlord objects for a reason specified in legislation) and you are liable for the rent for the whole of the term if you cannot find another person to take the lease on.
- Is there a Service Charge and what does it cover?
- Who insures the premises or building?
- Many of the other terms will be standard for the length of lease that you are taking. It is very important that you let us advice you on the effect of all the terms of the lease before you sign anything as a bad lease can affect the value of your business when you sell it on as well as leading to expensive procedures or costly obligations whilst you are the Tenant.
We will agree a fixed fee, with no VAT payable, for all new leases. We give you certainty at a fixed price before you are committed.