How Can I Negotiate a Rent Reduction for a Commercial Lease in the UK?

Your commercial lease is likely a significant expense for your business in the UK. As such, it is essential to budget for this expense and, if possible, find ways to reduce this business outgoing. A rent reduction is one way to do this, and it is where you ask your commercial landlord to reduce the rent you owe as part of your lease terms. This article will explain why you might ask for a monthly rent reduction and how to negotiate this. 

What is a Commercial Lease?

As a business owner, you will lease commercial property to run your business unless you work from home. In a commercial lease, you are the tenant or lessee, and your landlord is the lessor. 

You will have a commercial lease agreement between the two of you detailing the terms and responsibilities within the commercial lease. A lease agreement is a legally binding contract which documents that you enjoy the sole occupation of the space for an agreed use and in return for regular rental payments to the landlord.

Why Ask for a Rent Reduction?

As a business owner, you must aim to get the most favourable terms for your business, including your commercial lease. Therefore, you might ask your landlord for a rent reduction to reduce the costs associated with your business to make your rent more affordable.

While providing a rent reduction might seem like a disadvantage for your landlord, it might be suitable in some circumstances. For example, suppose your business is struggling to make profits. In that case, a rent reduction allows your landlord to still receive rent (at a reduced rate), which may be preferable to your business deferring rent or making late payments. Likewise, offering a rent reduction eliminates the hassle of your landlord chasing you up for money your company does not have or having an empty building if they lose you as their tenant. 

There may be specific times when there are good reasons to ask for a rent reduction. For example, during the recent COVID-19 pandemic, businesses may have been more likely to ask for a rent reduction. Similarly, if another pandemic hits in the future or other types of business interruptions occur, you may consider the need to ask for a rent reduction. 

Negotiating a Rent Reduction

You may negotiate a rent reduction before agreeing to a new commercial lease or when you are due to renew your existing lease agreement. You may negotiate changes if you have a protected lease, although your landlord does not have to accept these. A protected lease means that your right to renew the lease is protected, so once you serve notice to your landlord that you wish to renew, you can negotiate the lease terms, including any rent reduction. If your lease is not protected and your landlord is happy for you to renew, you also negotiate new lease terms.

Additionally, your landlord might accept a rent reduction in exchange for some benefits. For example, in exchange for a rent reduction, you agree to renew the lease rather than move to another commercial property. A commercial landlord often prefers to keep a good existing tenant with a reduction in rent than look for a new tenant, particularly if the market is slow.

Key Takeaways

When entering into a commercial lease or deciding to renew an existing one, it might be worth considering a rent reduction. It is helpful to look at what the current market rate is for the property to guide you in negotiating a rent reduction. Your landlord may agree to a rent reduction rather than have you unable to pay your rent or have an empty building if you vacate the property.

If you need help understanding rent reductions in commercial lease agreements in the UK, our experienced leasing 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 for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.

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