Signing a commercial lease is an exciting and important step for any tenant, but it can be a complex process.
With a lot of information to digest and many intricacies to understand, it can be easy to overlook key details or make unintended errors when signing the dotted line, particularly if it is the tenant’s first time doing so.
By keeping in mind the most common mistakes typically made in the lease-signing process, tenants can set themselves up for success and avoid any costly mistakes.
Mistake 1: Not understanding the terms of the lease
A commercial lease agreement is a legally binding contract between a landlord and tenant which outlines all the terms of the lease and the responsibilities of both parties. Given its nature, large amounts of jargon are frequently used, and a mistake tenants often make is failing to understand the conditions and terminology more importantly the implications of those conditions before signing.
Taking the time to thoroughly review the agreement and carry out any further necessary research is well worth the effort and can help avoid unforeseen challenges further down the line.
Establishing a clear understanding of the length of the lease, what each party will be expected to pay for and any exit clauses means tenants can be confident they are making a well-informed decision before signing.
Mistake 2: Overlooking the financial implications and hidden costs
Taking on a commercial lease is a huge financial obligation, yet many tenants don’t consider the implications for their business, as well as any hidden costs that may have an impact.
Does the amount of rent the tenant will need to pay align with their growth plans, or will it become a financial burden? Weighing up the pros and cons to determine whether the cost is worthwhile for the business is a crucial but often overlooked step.
It’s also paramount to consider any hidden costs. In addition to basic rent, will there be an expectation to pay a service charge, cover maintenance and repairs, or contribute to the upkeep of any shared spaces and facilities within the property?
Tenants who fail to understand any extra costs before signing their agreement may be in for a nasty surprise upon moving in, so it’s key to take the time to carry out due diligence ahead of time.
Mistake 3: Failing to establish the business’s property needs
Many tenants don’t take the time to reflect on their business’s goals and how they will align with what is needed from a commercial property, but this is a step that can make all the difference in getting the most out of the space.
Considering the financial implications is crucial, but it’s also important to establish how the business is expected to grow over the length of the lease and therefore how many individuals will need to be accommodated for, as well as what their needs will be.
Equally, tenants need to consider the types of clients or customers they are aiming to attract, as the location and accessibility of the property will play a crucial role here. Failing to provide a space that meets long term business goals is something tenants should avoid at all costs, but careful evaluation and planning can help with making robust and sensible decisions.
Mistake 4: Not carrying out a thorough property visit
Before signing a commercial lease, it’s important for a future tenant to see the physical state of the property.
Neglecting to take the time to check the property out in person could lead to disappointment, but carrying out due diligence before signing any official documents means tenants can be confident in their decision.
Checking for any damage in the property is crucial, particularly if the tenant is expected to pay for any repairs. Taking into account accessibility needs is another important point, and inspecting the property thoroughly means any requirements can be addressed ahead of time.
Mistake 5: Neglecting to seek the help of an expert
Navigating the process of signing a commercial lease can be daunting and confusing, yet many tenants choose to go it alone instead of making use of the help on offer.
Seeking professional advice to assist with understanding the terms of the lease and working through any additional costs and complexities is a fantastic way to prevent tenants from making any costly mistakes and to give them the confidence needed when signing such an important document.
Final thoughts
There is a huge amount to consider when signing a commercial lease, and this overwhelming process can lead to errors if the time isn’t taken to consider how this will impact the business.
Every step should be thoroughly considered before signing to ensure business stability and future growth are kept front and centre throughout the process. If tenants stick to these guidelines, a successful tenancy will follow.
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