Getting the foundations right

1) Do I know an experienced property agent?

If this is your first time looking at taking a commercial lease, the whole process can be an incredibly daunting one with words and terms being thrown at you that you may never have heard of before. There are many horror stories on the internet about people trying to negotiate (and even draft and complete) their own leases which has led to huge unforeseen financial liabilities for them down the road.

Finding an experienced property agent who knows the office/warehouse/commercial unit (delete as applicable) may cost you money but can also:

• Find the property you did not even know was out there;
• Offer their experience and tell you what you should accept and what terms from the landlord you should reject; and
• Help you get to the finishing line sooner rather than later.

2) Are there any potential pitfalls regarding location?

If you do not wish to go down the agent route and you want to find the property yourself, location is everything! For example:

1. If you are looking for a space for a bar or a nightclub, what are the transport links like for the area? The property may be ideal for you from an aesthetic point of view but your business may struggle if you cannot get any customers to the property!
2. If you are looking to take a lease of a warehouse with offices on an estate which is outside the city, you are going to have to employ a significant number of staff to work at the property. How many parking spaces are you going to have made available to you for staff to park in? Is it going to be enough so that you can guarantee that staff can easily get to and from the property?

3) What are the current costs?

You have factored into your business plan for the property your costs for employing staff at the property and the rent. However, there may be other costs which you have not factored in, such as:

1. Service charge
2. Insurance rent
3. Business rates
4. Utilities such as water and electricity.

The above can run into the many thousands of pounds per year. Try and get some form of indication (even a rough idea as it is better than nothing) from the landlord as to what the above costs may be per year so they can be factored into your budget for the property.

4) What condition is the property in? And what level am I required to keep it at?

Most first drafts of a lease from a landlord (where heads of terms are silent on the point) will have a minimum obligation on the tenant to keep the property in some form of repair e.g. “good repair”, “good and tenantable repair” or “substantial repair”. A covenant to keep the property in repair includes an obligation to put the property into repair if it is in disrepair at the start of the lease, meaning you may be obliged on day one of the lease to spend money to improve the state of repair and condition of the property due to disrepair which was not of your own doing

If you are looking at a property that could do with some work being done to it, make sure to make a note of this and let your solicitors know about this when you instruct them who can provide you with options as to what to do in this situation.

5) Can I use the property as I want?

You have now found the property that you want and want to make an offer to the landlord. However, are you allowed to carry out your intended business at the property? For example, the property you want was last used as a shop but now you want to turn it into a pub – ask the landlord what the latest planning permission for the use of the property is (your solicitors will need to check this for you anyway). This way, when you come to instructing solicitors, they can advise you as to whether a planning application will be needed to change the planning class of the property (which may mean that your deal will need to be conditional upon a new satisfactory planning permission being granted or you could be stuck with a property that you cannot use for your intended use).

Final Thoughts

A lease agreement is not just a document but a long-term commitment that can shape the future of your business. With the right support, you can secure a property that not only meets your current needs but also supports your business’s growth and success in the years to come.