What to watch out for with a commercial lease
A good commercial property lawyer is essential when negotiating a commercial lease as there are many legal pitfalls and a Landlord will often present the prospective tenant with a “standard lease” – frankly, there is no such thing and with commercial property transactions, many aspects, if not most, come down to negotiation, so when choosing a property lawyer, make a judgment also about that lawyers negotiation skills as well as legal knowledge.
Common issues include
- The condition of the property – Repairing covenants in leases can prove very costly so it is vital to check the current condition of the property. This may involve getting in a building surveyor to report on current condition and then the property lawyer should negotiate on the repairing obligations.
- Lease provisions about alterations – the lease will have stipulations about what is or isn’t allowed and the procedure for seeking permission in the future. It is essential that consent for any fitting out works is obtained before the lease is signed.
- Permitted use – commercial property solicitors should should establish what the tenant wants to use the property for, what the current permitted use is and whether the landlord will agree a fairly wide clause allowing change of use in the future either without consent or with the relevant clause generally in favour of the tenant, since it should be remembered at the outset that many leases are sold on and the more flexibility in the lease, the easier to find a tenant to sub-let to or sell to. Remember also that a planning application for change of use may be needed before the lease is concluded.
- Service Charge – Particularly important for a commercial lease in only a part of a building or a unit on a business park. Service charges can vary greatly both in extent and amount. If possible always try and get service charge fixed or capped.
- Termination Rights, sub-letting, assignment – an absolutely vital area. Always think of the exit strategy right at the outset and include in your thinking the ability to sub-let or assign the lease and whether you will remain liable for anything if assigning the lease. Also consider strategic break clauses. Landlords frequently try to resist granting you termination rights and may attempt to attach all sorts of conditions which make it difficult to exercise these rights and your lawyer should negotiate the exact wording of these rights in the lease.
