Top tips for tenants negotiating a commercial lease

As a business owner, finding the right premises for your company is of the utmost importance. The right space and location can after all make or break business success, providing access to customers, clients and lucrative locations. 

Whether you’ve found the perfect commercial property to get your fledgling business off the ground or are looking to move your company into a larger, more suitable premises, negotiating a commercial lease is a crucial step. Here at Rory Mack Associates, we are so much more than a commercial estate agency and property management expert. We provide the professional services commercial tenants need to maximise their bargaining power and make the most of their commercial rental. 

Here we share our top tips for negotiating a commercial lease and discovering a better deal for you and your business.

Decide whether a short or long lease is right for you

Our commercial estate agency has helped commercial tenants negotiate both long and short leases. Commercial leases are available in a multitude of lengths, which makes negotiating a lease length that supports your business in the here and now, and long into the future, a great place to begin. 

Whilst shorter commercial leases are much more common and flexible for commercial tenants, longer leases certainly have their perks, particularly if you are looking to rent a property that requires investment to make it fit for your specific business purpose. 

Review your business plan, and more specifically your short and long term business goals, to decipher whether a long or short commercial lease is the best choice for you.

Take other commercial property expenses into account

As our commercial estate agency and property management specialists have witnessed, negotiating a commercial lease doesn’t just boil down to the rent you’ll pay from month to month.

You’ll have other expenses to pay and negotiating your commercial lease with these in mind will help to boost your business’ bottom line. Business rates are one such unavoidable expense for commercial property tenants. Business rates are due on all non-residential properties in England and Wales. Whilst discounts are available, the average business rate can increase a company’s monthly expenditure by up to 40%.

Calculate your business rates in advance and negotiate your commercial lease to absorb some of this cost.

Request a rent free period or break clause

Rent free periods and break clauses are just two of the lease incentives available to commercial tenants, and recommended by our commercial estate agency and property management experts during lease negotiations. 

As the name suggests, a rent free period is set period of time when a commercial tenant isn’t obligated to pay rent. Rent free periods are generally placed at the start of a commercial lease and can be beneficial to both the landlord and the tenant. 

With a rent-free period, tenants will not have to pay rent, which can free up cash to use elsewhere in the company or to fit out their new commercial property. During this time, tenants will have to pay any business rates due on the property, however. Landlords are keen to offer rent-free periods as whilst they’ll be missing out on rental income, they will not be liable to pay business rates. 

Break clauses can also be negotiated to ensure better flexibility and financial freedom. With a carefully negotiated break clause, both parties will have the right to end the commercial lease earlier than planned if needed. A tenant-only break clause would be more ideal but is generally less common.

Pay special attention to your tenant responsibilities

Tenant responsibilities vary from commercial lease to commercial lease. Some commercial leases encountered by our commercial estate agency and property management service require tenants to handle all repairs to the property, whilst others will see the landlord take responsibility for some or certain repairs. 

Beware of the term ‘keep in substantial repair’. This would mean that you are obligated to fix not just all repairs that arise during your lease period but any issues caused by the landlord or previous commercial tenants.

Check for planning restrictions that could hold your business back

Our commercial estate agency has assisted in many lease negotiations, and many of the tenants we’ve supported have gone onto completely transform their commercial properties. But what if you sign on the dotted line only to find you can’t alter or upgrade the building as intended?

There is a long list of planning restrictions that apply to commercial property, and these differ depending on the property type, purpose and area. Check whether planning permission is required and how likely it is that your plans will be approved by your local authority in advance of lease negotiations.

This is even more important if you intend to change the property’s use. You can contact your local planning office for guidance and use the information gleaned to support your negotiations.

Beware of landlords who ask for a deposit and a personal guarantee

When leasing commercial property, you simply should not require a rent deposit and a personal guarantee. Commercial property landlords do not need both – one or the other should suffice – so beware of commercial leases that stipulate otherwise. 

You should also pay special attention to the Heads of Terms. You should seek legal advice in regards to their negotiation, and request the agreed principles in writing before the final lease contract is drawn up and signed.

Let us take care of commercial lease negotiations for you

You don’t have to tackle difficult commercial lease negotiations alone. Our commercial estate agency and property management service have experience and expertise in negotiating leases and lease renewals. 

For further support with your commercial lease negotiations, get in touch with our commercial estate agency today.