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Taking a business lease

23 May 2016
This article is part of our Business Premises Guide
Providing information to support business owners with some of the more common decisions and considerations that you would need to take into account when moving business premises, from taking a commercial lease or buying a property to tips on who you should seek help from at each stage.

Leases, also known as commercial rental agreements are complex documents with differing arrangements and primarily set out the terms and conditions of an agreement between a landlord and tenant. Few people outside of the property and legal worlds will understand all of the details included in a lease agreement.

Jonathan Hand from Talkspace Group, explains “Business owners mistakenly believe that the commercial property agent, who is marketing the property, is acting for them when in reality they are acting for the landlord or property owner.”

At this point it would be advisable to seek help from a professional – a property consultant or a solicitor to act on your behalf.

Leasing is generally more flexible in the short term than buying. If your business is relatively small and still has plenty of room to grow then it may be your preferred option.

Paul Bagust, Director of Commercial Property Professional Group at RICS (the Royal Institution of Chartered Surveyors) adds: “People don’t always take time to read their leases in detail, that’s the fundamental flaw. There is an assumption that a lease is presented to you, you sign it and then you give it back. That’s not at all how it should be.”

“You need to understand the whole lease terms especially when it comes to rent reviews and things like dilapidations.”

  • Greater control over your monthly outgoings with fixed fees
  • Some financial emphasis may lie with the landlord (for example, external maintenance) which may reduce financial strain
  • Short term leases mean that you have more freedom to move easily
  • There are restrictions to the changes that you can make to the property – with landlord approval normally required
  • Costs – there may be costs such as deposits or rent up front that could be costly to your business 
  • When you leave the property you will be responsible for returning the property to its original state which could be costly

There are a number of things that you should consider and look further into before signing a lease:

How often the rent needs to be paid and how this fits into your business cash flow plans.

Use of premises
Does the landlord have planning permission? Can you make adaptations and is the building and its permissions fit for your business activity? Read more on this in the Planning Permission and Use Classes section.

Length of lease
For new businesses in particular, a lengthy lease could be a burden, so you may want to opt for a shorter term lease. Start-ups may even consider a licence fee agreement.

Costs and repairs
This falls into two categories – utilities and repairs – usually utilities will be an additional fee but it is worth checking to see if this is included as part of your rent or not. In most lease agreements, internal and external repairs are the responsibility of the tenant.
“One of the biggest areas of dispute between landlords and tenants surrounds the liability for repairs, especially around dilapidations at the end of the lease. These disputes occur because the tenants did not fully understand the implications of what they signed up to.” adds Jonathan from Talkspace Group.

Tip: Consider checking other rental prices around the area, you may be able to negotiate with the landlord if there are similar properties available for lower rent.

It is important to make sure that you have the right insurance in place to protect the business that you have built. Every business is different and has its own business insurance needs, which is why we work with some of the UK’s most well-known insurers to ensure that you are getting the right insurance cover for your business.
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