Advice: Top tips on lease negotiation

By Lancashire Business View

16 Apr 2014

Before you make the move into new premises here is some of our expert advice and our top tips on lease negotiation to get the results that work for you.

By Brent Forbes, director, Petty Chartered Surveyors. Personal guarantees During negotiations a Tenant may be asked to provide a personal guarantee. This protects the Landlord who will wish to put this in place should a Tenant default on the Lease and claim bankruptcy. If you do give a personal guarantee to the Landlord don’t forget that he can come after the Guarantor for the balance of the Lease and any moneys owed.

In Need of Flexibility The greater the amount of flexibility that can be negotiated into a Lease, the more attractive it will be for a Tenant whether this is a monthly rolling contract, break clauses at specific periods or sub-letting clauses. However, the Landlord may require an increased rental in lieu of the flexibility and if you are looking to assign your Lease a Landlord may require your incoming Tenant to satisfy certain criteria. Consequently assignment of a Lease to a new Tenant may not be straightforward and may hold up any prospects of relocation.

Usage Ensure that there aren’t any restrictions within your Lease such as opening hours, signage, restricted access and a strict user clause. For example, you may initially take on premises for the purpose of retail, but your business needs change to an on-line provider and you wish to use the premises for warehousing rather than retail. These limitations can hinder your business and become prohibitive for future success.

Pre-existing Condition Clauses Landlords will sometimes seek to negotiate an inclusion of this clause which requires Tenants to restore the accommodation to its original condition and appearance when they move out. This can be very costly and can make the changes you initially planned too expensive to rectify when you want to vacate.

Tenant Repairs Ensure you know who is responsible for the repair not only to the structure but also the fittings such as central heating systems, lighting, leaking windows and so on. Many Landlords will attempt to have Tenants pay for these expenses so clarify the situation and ensure that it is written in to your Lease so that there is no ambiguity. Service Charge This is in addition to your rent and can change significantly from year to year if major refurbishment or upgrade to the common areas is required so take into account the current charges and how they may fluctuate over the coming years.

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