For Savvy Business Tenants: Commercial Leasing Considerations

Today, many business owners in the UK prefer to lease commercial properties than buy them. This trend can be attributed to the increased hesitance shown on the part of business owners to tie up valuable resources to owning and managing premises.

What is commercial leasing, you ask?

Commercial leasing is the practice of legally renting a commercial property for commercial use. The terms of the lease are set out in a mutually agreed contract between a business tenant and landlord, and it’s legally binding on both the parties to honour the contract as is during the entire tenure of the leasing term.

Since leasing a commercial property involves significant investment (even if the capital outlay is much less than purchasing a property outright) and could shape the future of your business, knowing the important considerations pertaining to the practice can certainly be beneficial.

In this blog, we overview the considerations to keep in mind when leasing a commercial property for use.

Always choose the property wisely

There is no shortage of commercial properties in the UK; they’re everywhere, available in all shapes and sizes.

What’s worth remembering is that not all commercial properties are right for your business.

It’s therefore crucial to make your pick wisely.

When evaluating a commercial property for a lease, look for the following features:

• The property should be located near your customer base
• The property should be in an area where the infrastructure is properly developed
• The property should have room for expansion
• The property should meet minimum energy efficiency standards as set out in the latest energy efficiency regulations

Set the length of lease based on longterm business goals

The terms of a commercial lease can typically vary between 2-25 years. While most business owners opt for short-length leases since this reduces their upfront costs, we would recommend setting the length of lease based on your long-term business goals as this would ensure security years down the line. It will also allow you to focus on other aspects of your business without worrying about the lease getting expired and renegotiating it.

Secondly, you won’t have to renegotiate the lease come a potential realization that the current lease conditions do not suffice your long-term business goals. Renegotiating may give your landlord an upper hand.

Third, a long lease is much cheaper than a short lease renegotiated at periodic intervals for the same term length.

Make sure to get the proposed use of the property documented in the contract

Don’t assume that just because a landlord is granting you a property for a proposed commercial use, you can use the property in that way.

Well, you should be able to, but sometimes landlords may have other ideas.

They may not agree to some of your proposed activities (they may not show any reservations initially though) and later raise an objection.

As such, if you don’t have their prior written consent, you could be in trouble.

Therefore, make sure to detail the proposed use of the property in the lease contract. Mention and explain it in clear words so there is no potential case of ambiguity for your landlord to leverage.

A commercial leaseis considered as an agreement between two educated, knowledgeable and well-informed parties.However, its complexity cannot be argued upon. And so, it’s recommended to always hire a professional solicitor when negotiating and drafting a commercial lease.

If you’re in the process of negotiating or drafting a commercial lease, reach out to us for expert and trusted legal advice.