“I wouldn’t have ever thought about that”and “I didn’t realise that”are two phrases that we hear all too regularly when we are advising business owners on lease negotiations.
This is probably not that surprising when you consider ‘how to negotiate property leases’ is not taught in school. Unfortunately, many business owners have learnt the hard way, by being caught out. Being caught out costs money. Why go through this harsh and costly learning experience, when help is available?
Negotiating a lease that works for you and not the landlord, takes expert knowledge and experience. The adage, a little knowledge can be dangerous, is very true in property lease negotiations. Knowing what half the lease terms mean, is not good enough.
What do you need to know?
You need to be aware of what lease terms need to be negotiated.
And
The impact (or implications) of the lease terms you agree to.
A good example of this, is contracting out. This sounds fairly innocuous as a lease term, but it can have a significant impact on your businesswhen the lease is coming to an end. Many business owners will agree to this, without too much of a second thought. However, the implication of agreeing to contracting out, is that it puts the power of the lease negotiation in the hands of the landlord, if you want to stay on.
Some of the other lease terms to consider the implications ofare:-
Length of lease
Demise
Rental payment
Incentives
Break Clauses
Rent reviews
Service charge
Alienation (subletting and assignment)
Repairing liability
Alterations
Reinstatement
Insurance
Redecoration
User clause
Each one will have an impact on your business (and a likely cost). Some are more serious than others.
If you don’t understand what impact these could have, who can you turn to for advice?
Do not rely on the commercial property agent to help. This is not what they are paid to do. The commercial property agent is working for the landlord, it is not in their or their client’s interest to point out if you have missed something, or where mistakes have been made. It sounds harsh, but that is the reality.
You might decide that you don’t need help in negotiating, as your solicitor should pick up any errors. A word of caution, your solicitor is not there to negotiate for you,but to document what you have agreed and at this point the damage has already been done.
If you don’t know everything about leases, then please get some advice from a commercial property expert. Someone who is experienced in lease negotiations, who understands lease terms and their implications for you and your business.
It will save you money.
