Getting a fair lease agreement for a commercial property in the UK typically means lengthy and complex negotiations, especially in busy retail hubs. In this post, we’ll show you what you’ll need to figure out with the landlord before you sign any documents.
General Lease Terms
You need a commercial lease that suits your business, its current needs, and even its long-term expansion plans. For example, how long will the lease be? Commercial leases generally start at three years but can easily go up to ten.
A short lease gives you more flexibility, especially if you’ll need a bigger space in a few years — but long leases give you security. Of course, this depends on how well you keep up with rent.
You also need to think about your space requirements. For example, how many m² do you need to run your business? Don’t accept a space that’s too small just because it’s cheaper; this might make it impossible to do your job.
Finally, make sure your repairing obligations only extend to the parts of the property you occupy. If you’ll be in a shared building, ask if the landlord can maintain the common areas.
Rent Payments
Your first step here should always be to check similar spaces nearby to make sure you won’t get ripped off. However, nearby footfall plays a big role here — you might have to accept higher rent in return for (potentially) more customers.
You may even be able to negotiate a rent-free period near the start of your tenancy, especially if you need time to set everything up. You’ll have more luck convincing the landlord if you agree to a long-term lease.
It’s also worth discussing when to review the rent, usually every few years. The UK government is actually trying to ban upwards-only commercial rent reviews, so you won’t just have to accept an increase; you can negotiate for lower rates.
Expansion Plans
You likely won’t plan on staying in that space forever, especially if you reach a growth stage; this is why so many businesses prefer a shorter-term lease. If your projections show you’ll bring in a lot of money for the area, negotiate the right of first refusal for nearby vacant units.
A good landlord won’t want to lose you, especially if you’re making money. They might agree to let you switch to a bigger property without serious penalties. Alternatively, you can rent a second unit; this will act as “overflow space” to manage a huge spike in customer demand.
Alterations
Chances are, you’ll have to change the space to fit your business. This can go a lot deeper than simply adding your branding and equipment; even repainting the walls could be controversial.
Here are a few other alterations you might have in mind, all of which you should at least mention before signing:
- Adding partition walls to create office layouts
- Adding ventilation systems and air conditioning units
- Installing cabling that requires drilling through the walls
- Changing the floor (e.g., hardwood to carpet)
- Adding security systems, alarms, and shutters
- Installing everything a commercial kitchen needs
You should be able to get a clause that says minor, non-structural alterations are perfectly fine.
Service and Utility Charges
Beyond the rent, you’ll still have to pay for general maintenance and utilities, among other costs that landlords pass on to their tenants. These can include:
- Cleaning the common areas and windows
- Paying for security guards and CCTV services
- Getting comprehensive building insurance
- Landscaping nearby gardens and car parks
- General management/administration costs
- Health and safety inspections
You should make sure capital improvements and major refurbishments aren’t included, and that there’s a cap on yearly service charge increases. You also have to think about business rates — landlords don’t set these, but they’ll likely push you to cut expenses elsewhere.
Other Clauses Worth Discussing
A custom commercial lease lets you add extra clauses to the document and present them to the landlord. Here are some common clauses that’ll work in your favour:
- Break clause: This lets you end the lease early — this will ideally be tenant-only, or your landlord could ask you to leave just as you’re starting to thrive.
- Tenant improvement allowance: Some landlords give tenants extra money to build out a unit; you could even use it to offset rent.
- Exclusivity: You won’t want a competitor setting up shop nearby. Ask the landlord if you will be safe from competition during your tenancy.
- Relocation clause: Landlords often reserve the right to move tenants; this allows you to guarantee you still end up in a unit that fits your needs.
Final Thoughts
Your UK commercial lease is only worth signing if it’s fair to you; that’s why you’ll need an online template. This will let you add and discuss extra clauses, while also showing you exactly what a fair lease looks like.