How to negotiate a commercial lease: practical steps for dealing with a landlord

The useful part

Small Business UK Home / Knowledge Hub / How to negotiate a commercial lease – tips for negotiating with a landlord Knowledge Hub. Simon Maddox Key points: negotiating a commercial lease is fraught for any new business Ensure you know about security tenure, service charges and hidden costs before you start to negotiate with a landlord. Know the terms that you intend to negotiate on, such as the length of the lease.

How it works

• Not knowing how to negotiate a commercial lease is stressful for any business owner.
• However, with the right advice, entrepreneurs can avoid common pitfalls, securing a deal that's right for their business, with the appropriate safeguards necessary for an ambitious start-up.
• They also have the right to request a renewal with terms similar to their existing lease.
• Landlords do have the right to dispute carrying on with similar terms should they have a valid reason, such as persistently late payment of rent.
• It's a good time to talk about how rent is reviewed and whether that's in line with the retail price index, a fixed percentage, or another metric.

What to take from it

Cleaning Repairs Utilities Health and safety compliance Insurance Risk assessments They're mandatory if they're included in the lease agreement. Conversely, you may find that things do not go so well, and that you no longer require as much space or wish to terminate the letting in its entirety. Shorter leases offer more flexibility while a longer lease can be cheaper.

Example or evidence

• If the building isn't critical to your business or you don't have any long-term plans with it, you can opt out of security of tenure for more beneficial lease terms.
• With this in mind, you should also consider as to whether to take the lease in a newly incorporated limited company, rather than – in the case of a sole trader – your own name.
• Always bear in mind that landlords will in likelihood require you to reinstate the premises at lease expiry.
• This is particularly important to bear in mind where works are significant as removal will be at your cost.

Details worth keeping

Taking your first commercial premises can be an integral part of this process, bringing its own challenges and obstacles. Taking commercial space is an exciting step for any business, but it's unfortunately very easy to make mistakes that could cost the business dearly in the future. Act 1954 is under review to bring it in line with modern standards.

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