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Top tips for tenants negotiating a commercial lease

  1. Ask for a rent free period.  Given the state of the property market at the moment Landlords are anxious to get Tenants into occupation and will frequently agree significant rent free periods to avoid having to pay business rates themselves.
  2. Think carefully about who is taking the Lease. Ideally you should take it in a separate limited company rather than in your own personal name as a Lease is very onerous obligation and can expose you to significant personal liability. Not all Landlords will agree this since they may look for some security if you are proposing to take the Lease in the name of a limited company which has little or no financial history.
  3. Ask for a break clause (a right for you to end the Lease early). This gives you flexibility in that although you might commit to say a 5 year Lease you could perhaps bring the Lease to an end on each anniversary of the Term by giving to the Landlord an agreed period of notice.
  4. Don’t agree to pay the Landlord’s legal costs. This is not standard practice and given the current state of the property market, the Tenant should not be paying Landlord’s legal fees. Each party should pay their own.
  5. Carefully consider your repairing obligation. You should either try and limit your repairing obligation to looking after say the interior only, or alternatively if you have to accept a responsibility to repair the inside and the outside of the building, limit it by reference to a Schedule of Condition.  A Schedule of Condition is a record of the condition of the premises at the start of the Lease and you can make it clear that you do not have to put the property into any better state of repair and they were at the start of the Lease as evidenced by the Schedule of Condition.  Also give some thought to the Landlord carrying out some works on your behalf prior to the commencement of the Lease to make the premises fit for your proposed use.
  6. Ensure that your Lease is within the Landlord and Tenant Act 1954. This means that at the end of the Term you will have a right to apply to Court for a new Lease unless the Landlord objects. The Landlord can only object on certain specified grounds.

If you require any advice on negotiating a commercial lease, or indeed on any other property matter, please do not hesitate to contact us.

By Ian Liddle, Commercial Property Solicitor

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