5 Questions to ask before signing a commercial lease

January 29, 2016

Committing to a lease of commercial property can be one of the biggest decisions made by any business. Asking the landlord the right questions can help to make sure that the property and the lease are suitable for your business needs.

Five good questions to ask are:

1. How much is the rent and when will I have to pay it? Rent can be one of the most expensive overheads that a business faces. Agree with the landlord how much the annual rent will be and when you will have to pay it. Most commonly it will be paid in four equal quarterly payments in each year. Also ask whether your landlord will charge you VAT on the rent. At an additional 20%, this will increase your costs significantly if you are not VAT registered.

2. Can I legally use the property for my business? Your lease will limit the use of the property to a specified purpose so ask the landlord what you can and can’t use the property for. It is also your responsibility to check that the property has the right planning permission for your business needs so always ask the landlord to confirm to you that the permitted use complies with the planning permission. If it doesn’t, then a planning application will need to be made.

3. Can I cancel the lease is my circumstances change unexpectedly? It is important to consider that the length of the lease is appropriate to your business needs. As this may not always be possible, ask the landlord if they will agree to include a ‘break clause’ in the lease. This would allow you to give the landlord written notice that you want to end the lease early on a fixed date. This can be very useful for new businesses that wish to keep flexibility.

4. Who is responsible for repairs? Carrying out repairs to any property can be expensive. Agree with the landlord who will be responsible for this. Most landlords will want the tenant to take on at least some repairing obligations and you should always satisfy yourself that no major repairs that will be required. Also check that the lease does not require you to put the property into a better state of repair and condition than it was in when you took it. It is always worthwhile getting a surveyor to prepare a schedule of condition to record the state of the property at the time the lease is signed as evidence.

5. Who is responsible for buildings insurance? Usually, the landlord will arrange and pay for the buildings insurance and the tenant will pay them back the cost of the premium or part of it if the building has more than one tenant. Always ask for a copy of the landlord’s buildings insurance policy to check the terms of it and how much the premium is so that you know how much you are likely to be asked to pay.

Alex Hunter – LawBite Commercial Property LawBrief. For further legal advice you can contact Alex via our online legal advice portal.

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