Renewing your commercial lease presents the ideal opportunity to ensure that you are occupying on the best possible terms. Rent and other lease expenses are often the biggest outgoings for a business so it is important to review them on a regular basis. Below is what I consider are the 5 most important things to think about before signing on the dotted line.
1. Take your time – Ideally you want to begin looking at your options at least 12-18 months in advance of your renewal/termination date, longer in advance if possible. Some leases may have clauses which require you to notify your landlord of your intention to stay 6 or even 12 months before the end of the lease. Having time on your side will help with negotiations as your landlord potentially saves the time and cost of finding another tenant. If you leave renewal until the last moment it is common for important items such as assignment rights and default clauses to be missed.
2. Explore locations – Try not to tie yourself to one area as there are often better deals in surrounding areas which you may not have considered. Work on the basis of a hierarchy of requirements based on space, use, location, tenant inducements etc which will vary with each situation. You may find that compromising on location is outweighed by benefits such as space and assignment rights.
3. Negotiate most items – For example, you may wish to negotiate the inclusion of better renewal options as an added protection if your location is critical to your business or if it is difficult to move your business. There are some clauses which are non-negotiable such as business tax rates but factors such as the length of the lease, the deposit, and rent are all negotiable. In the current economic climate it is worth trying to negotiate a rent free period and a break clause giving you the flexibility to move should your business requirements change.
4. Research alternatives to renewal – Even if you are dead set on renewing, it is a big advantage knowing the marketplace and comparing it with your property to see if you are getting a good deal. As a result you may find an alternative which is more appropriate or cost effective. For instance, the availability of similar properties may have increased since you began the lease or other lease providers may have more favourable terms such as a rent free period.
5. Seek professional advice – It is recommended that you consult a qualified property lawyer when renewing a lease. They will be able to review your lease and highlight any unusual or onerous terms before you sign and are bound by them. Checking the renewal before signing could save you time and money. For example, having the lease reviewed may avoid you being held liable for repairs which you were not aware of. If you require a lease checking service please contact me at LawBite for a competitive quote.
Kate Richmond – LawBite Commercial Property LawBrief. You can find out more about Kate in our Meet The Team section.