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Tips for negotiating favourable terms in commercial property leases

Securing a favourable commercial property lease can be a game-changer for your business.

A well-negotiated lease not only provides financial security but it can also significantly impact your business’s operational efficiency and success.

Understanding the ins and outs of commercial lease negotiation is crucial.

Identify your business needs

Start by clearly defining what you need from a property. Consider factors like location, size, layout and access to transport links.

Your business needs should guide your search for a suitable property and ultimately, the lease terms you seek.

Negotiate lease length

Commercial leases do not have specific minimum or maximum durations. However, they typically span from one to 25 years, with the majority falling within the range of three to ten years.

When negotiating the lease length, it is essential to consider both short-term and long-term business goals.

Shorter lease terms, such as one to three years, provide flexibility for businesses that may anticipate growth or relocation in the near future.

On the other hand, longer lease terms, typically five to ten years or more, offer stability and may be more attractive to landlords.

Tenants seeking shorter lease terms should emphasise the benefits they bring, such as their commitment to maintaining the property, their strong financial position or their ability to enhance the property’s value through improvements. This can help alleviate any concerns the landlord may have about shorter lease lengths.

For longer lease terms, tenants may want to negotiate favourable break clauses that allow for early termination or lease renewal options to provide flexibility in case circumstances change

Break clauses are provisions that allow either party to terminate the lease before the agreed-upon expiration date though usually only the tenant, subject to certain conditions. It is important to clearly define these conditions to avoid ambiguity or disputes later on.

Additionally, tenants should carefully review the rent review clauses associated with longer lease terms.

Rent reviews determine how the rent will be adjusted over the lease’s duration, usually at regular intervals of three to five years.

Understanding the mechanisms of rent reviews and negotiating reasonable terms can help prevent unexpected rent hikes.

Navigate repairs and maintenance responsibilities

Negotiating repairs and maintenance responsibilities are critical in the negotiations. As a tenant, it is essential to clarify and allocate these responsibilities to avoid future disputes and financial liabilities.

During negotiations, strive to negotiate a fair and balanced approach to repairs and maintenance, and seek to establish a clear division of responsibilities between the landlord and the tenant.

Ideally, the lease should outline the obligations of each party, including routine maintenance, structural repairs and major renovations.

It is highly recommended that you thoroughly examine the property (along with the building it is a part of) for any maintenance issues and assess the potential repair costs before entering into a commercial lease agreement and agreeing upon the terms of a repair clause.

Additionally, explore the option of a schedule of condition which documents the property’s state at the lease commencement, further safeguarding against disputes later.

By negotiating these responsibilities diligently, you can secure a lease agreement that safeguards your interests and ensure a smooth and cost-effective tenancy.

Engage a commercial property solicitor

Engaging a commercial property solicitor is a wise decision when aiming to negotiate better commercial leases.

Solicitors possess specialised knowledge and experience in property laws, enabling them to navigate complex lease agreements with ease.

By relying on their expertise, you can ensure that lease terms are thoroughly reviewed, potential risks are identified, and favourable terms are negotiated on your behalf.

If you need advice on negotiating a commercial lease for your business, contact us today.

Carl Jones

Director - Head of Commercial Department

I qualified as a Solicitor having completed my training with Mander Hadley in 1992 and am a member of the Law Society Property Section and The Warwickshire Law Society.