When you run a business you’ll most likely have a lease for the property. Most leases are drawn up to favour the landlord so it is important to fully understand all the implications of the many clauses before you sign a corporate lease. Property lawyers are the best ones to give you advice on leases and it is totally worth the cost of hiring one to examine your potential lease and ensure it is a good fit for you and your business.
Most leases contain many clauses about a varied number of topics. Many of the clauses are negotiable if the landlord is willing, but not all are. If your potential landlord is not willing to negotiate on any point, it might be best to look elsewhere for your business premises, because some of those clauses are very likely to cost your business money – maybe even enough money to send you broke.
Negotiating with the landlord is the best option; where this is not possible, the landlord’s agent is the next best person. But first you need to know what exactly you want to negotiate and for this, you will need to know exactly what each of the clauses actually mean. A corporate lawyer should be able to explain everything and jot down what you should try and change. These might include: –
- Security of tenure. You will want to know how long the lease is for and have the ability to sign up again should everything be working out. Ten years is a good figure to aim for, but many landlords want a one or two year lease with the option of renewing. If your business plan indicates a ten year term to achieve your business goals, then you could negotiate for a two year lease followed by a three year renewal and then a 5 year term.
- The rent must be established in a fair way. A clearly defined method of increasing the rent should be used. Normally it is either: – (a) 5% per annum, (b) the Consumer Price Index (CPI) or (c) market. It should all be worked out ahead of time to ensure the rent is still affordable in the future.
- The lease also needs to offer protection from competition. If the premises are in a mall you would hardly want the landlord to lease out his other premises to someone whose product is almost the same as yours. This loss of income could be quite severe and it could also prevent you getting a good price if and when you decide to sell your business.
Many other clauses can also cause you grief, which is why having commercial lawyers examine the lease before you sign it is essential.