For a growing business, moving into your first premises is an exciting milestone. Whether it is a shop in Lancaster city centre, a unit on a Preston industrial estate or an office anywhere in between, the lease you sign will shape your costs and your flexibility for years to come. Commercial leases are nothing like residential tenancies. They are lengthy, heavily negotiated documents and the terms you agree at the start are the terms you live with. Here is what to look at before you commit.
Heads of terms are the foundation
Before solicitors are instructed, the landlord’s agent will usually prepare heads of terms setting out the key points of the deal, including the rent, the length of the lease, any rent free period and who is responsible for repairs. Although heads of terms are not usually legally binding, they set the direction of the whole transaction and terms conceded at this stage are difficult to claw back later. Taking advice before agreeing heads of terms, rather than after, puts you in a far stronger negotiating position.
Understand your repair obligations
Many commercial leases are full repairing and insuring leases, meaning the tenant is responsible for keeping the property in repair and for the cost of insurance, even where the building was in poor condition at the start. Signing one of these without protection can leave you paying to put right defects that existed long before you arrived. A schedule of condition, recording the state of the property at the outset and limiting your obligations accordingly, is one of the most valuable protections a small business tenant can secure.
Length, breaks and flexibility
Think carefully about how long you want to be committed. A longer lease can bring security and a better rent, but circumstances change quickly for small businesses. A break clause, allowing you to end the lease early at a fixed point, provides valuable flexibility, though break clauses often come with strict conditions that must be followed to the letter. You should also understand whether your lease is inside or outside the Landlord and Tenant Act 1954, which affects your right to renew when the term ends.
Watch the extras
The headline rent is rarely the whole story. Service charges, insurance contributions, business rates, utilities and VAT can add substantially to your outgoings, so ask for details of these costs before committing. If the landlord asks for a personal guarantee or a rent deposit, understand exactly what you are putting on the line and for how long. It is also worth checking that your intended use is permitted under both the lease and planning rules.
Get the right advice from the start
Our commercial property team acts for business tenants and landlords across Lancaster, Preston and much further afield, from first premises to expanding portfolios. We will review the heads of terms, negotiate the lease and make sure you understand every obligation before you sign, all in plain English. Once suitable heads of terms have been agreed, we may be able to offer a fixed fee for the legal work that follows. Taking on premises is a big step for any business, so contact our team today and take it with confidence.
