Key Terms to Negotiate For as a Commercial Lease Tenant in England and Wales

If you are thinking about leasing a commercial property in England and Wales, the property you rent needs to be right for you and your business. You need to understand and consider vital things before agreeing to commit to the lease, including whether the property is appropriate for your current and future needs. It is also essential to understand the actual cost of renting the property and your options if your needs change or things go wrong. This article will explain the key terms to negotiate as a tenant before entering into a commercial lease in England and Wales. 

Can You Use the Property for What You Want To?

You may think you have found the perfect location for your business, but this is no good if the property itself does not meet your needs. If you want to make substantial changes to fit out your premises, you will need to negotiate the right to do this in your lease. It is also essential to agree on who will be responsible for what.

It is also crucial that you consider whether the property itself is suitable for what you want to do from a legal standpoint. Commercial property will have a ‘class’ associated with it. For example, most common business uses are covered by ‘Class E’; these are commercial properties that include uses such as:

• office space;
• shops;
• cafes; and
• restaurants.

Term of the Lease

Before agreeing to rent a commercial property, you need to consider the likely future needs of your business. Are you planning to expand? Are you likely to need more or less space in the future? For example, with more and more people wanting to work from home at least part of the time, you may find that smaller premises will be suitable in just a few years. For this reason, you need to think about what fixed term of the lease would be appropriate for you and your business.  

Right to Assign or Sublet Your Lease

Even if you cannot negotiate a break clause into your lease, you may be able to agree to the right to assign or sublet your lease. A lease assignment is where you find a brand new tenant to take over your lease. A sublease agreement is where you sublet your lease to a new subtenant. 

A sublease differs from a lease assignment since you still bear all the responsibilities in your lease, whereas the new tenant takes on these responsibilities in a lease assignment. Although these rights can be agreed upon after the lease is assigned, if you can agree to the terms of any assignment or sublease in the lease agreement itself, this can help you later on if you need to consider this.

Rent

The rent amount needs to be appropriate for the type of property you are renting and affordable for your business. However, you should also consider how and when rent is paid and calculated. In some circumstances, the landlord will agree to a rent-free period at the beginning of your lease. 

As well as agreeing on the rent, it may be important to consider whether you will have to pay a proportion of any service charges or other outgoings concerning the property.

For example, this might be the case if your property is part of a business park or shopping centre. You might have to pay costs of: 

• parking provision; 
• cleaning of common areas; and 
• heating and lighting. 

Condition of the property

Generally speaking, you as the tenant will be responsible for keeping the property in good condition. Further, you will be held accountable for repairing any damage you cause. However, if the property you are planning to take on is not in excellent condition in the first place, you may be uncomfortable with this. In this situation, you would want to negotiate that you will not keep the property in any better condition than it is now.  

Access Rights to the Property

If the premises you are planning to lease are part of a larger property, you may need to consider things like roof space access or loading access. Similarly, your landlord may need to retain rights of access. In this situation, in addition to ensuring you have the access rights that you need, you will also want your lease to be clear about how and when the landlord can access your property and what notice they must give you.

Key Takeaways

Entering into a commercial lease is a big step. Therefore,  you should consider your needs and what you are likely to need before you commit to the lease. Some of the terms you should negotiate as a commercial lease tenant include:

• the ability to use the property as you wish;
• the ability to alter the property’s fixtures and fittings;
• rent provisions;
• lease length and the power to end the lease early;
• responsibilities for maintenance and repair; and
• access rights.

If you are a tenant and need help with negotiating the key terms of your commercial lease, our experienced commercial property lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions