SUCCESSFUL NEGOTIATION OF A BUSINESS LEASE FOR TENANTS

The aim of this article is to set out some tips for successful negotiation of a business lease by a tenant and where Feldon Dunsmore, as specialist solicitors, can help with this process.

1/ Heads of terms – as your solicitor we always like to review and approve the HOTs prepared by the landlord’s agent. It’s much easier to negotiate tenant friendly provisions as summarised in this blog before the landlord’s solicitor sets about drafting the lease

2/ Rent free period – landlord’s want a good tenant and this should be an incentive to sign up to a new lease or cover the period of any fit out works to make the premises ready for trading

3/ Repair – if the property is in anything less than pristine condition it’s always wise to have the tenant’s repair liability limited by way of a photographic schedule of condition in order to avoid a potential costly dilapidations liability

4/ Service Charge – check the previous 3 years’ accounts and the budget for the current year to see what costs the landlord has been incurring and request details of any major expenditure. We always try and negotiate an annual service charge cap with the landlord.

5/ Break clause – this gives some extra flexibility should you need to move premises for any reason. Check the conditions are not onerous and always have your solicitor serve the notice to exercise this to ensure it is validly given

6/ Renewal rights – if the goodwill of the business is linked to the location of the property or there are other reasons it would be detrimental to move then you should try your best to ensure the lease is within the Landlord and Tenant Act 1954 which affords some security of tenure

7/ Rights to transfer the lease or sublet – this should be permitted with landlord’s consent

8/ Alterations and signage – make sure you get the landlord to approve your plans at an early stage as most leases require this and also consider that you will generally be expected to reinstate to the original layout at the end of the lease.

9/ Rent review – these are more commonly upwards only to open market every 3-5 years. Don’t get caught out if you have negotiated a below market rent at the start of the term. Inflation linked rent reviews are now more common but given the current economic climate it would be wise to include a cap on RPI/CPI increases during the rent review period.

10/ Parking and other rights – make sure the lease specifically grants these rights

11/ Stamp Duty Land Tax and Land Registry – if the rent is over a certain aggregate level for the term of the lease this is applicable and for any lease of a term of 7+years it’s compulsory to register at Land Registry.

Instructing a specialist property solicitor to negotiate your lease is often seen as an avoidable cost but our experience is that we can save business tenants money in the long run just by properly documenting and negotiating the above main commercial and legal points.

For further advice on the above, please contact a member of the team on 01926 954694.