Reducing Risks for Business Tenants

Businesses need premises but because few can afford to buy they have to rent. Business leases can be loaded with risks so Tenants must always instruct a good commercial property solicitor.  But before that stage Tenants should consider this list during negotiations:

  1. Better if lease held by limited company? Tenants who are individuals are subject to unlimited liability putting at risk all personal and business assets.
  2. Directors and shareholders should not act as guarantor. But may be reasonable for Landlord to demand three month’s rent deposit?
  3. What length of lease?  If unsuccessful premises will no longer be needed but if successful then they will be too small. Try to negotiate some “Tenant only breaks”.
  4. Most business leases permit Landlord to levy VAT at any time. Some businesses will never wish to be VAT registered. If so persuade Landlord to never levy VAT.
  5. Repairing obligations can be expensive so best if Tenant agrees only to maintain in current condition as evidenced by photographs.
  6. In addition to rent will Landlord be adding cost of buildings insurance?
  7. If it is a shop will Tenant have to separately insure plate glass and shop front?
  8. In addition to rent will Landlord be charging service charge? If so try to persuade Landlord to cap it at a set amount.
  9. Will lease allow you to assign the lease or to sublet?
  10. Will you enjoy the Sections 24-28 Landlord and Tenant Act 1954 rights to renew the lease or will the term of lease granted be merely contractual?
  11. Does Landlord expect you to contribute towards his legal fees?
  12. If you will have to spend money on the property ask for a rent free period or a reduced rent period.

When negotiating remember that nothing is set in stone. At worst all that Landlord can say is “No” to your suggestions.

For further information regarding this article, please contact Peter Wilson at our Telford office on 01952 297979 or email peterw@terry-jones.co.uk

 

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