Starting a Business – Taking on Leased Premises

Starting a Business – Taking on Leased Premises

For further information or assistance please do not hesitate to contact Bradley Haynes Law via telephone: 01905900919 or email: welcome@bradleyhayneslaw.co.uk.  We would be delighted to discuss how we can support your business whether that be in relation to employment or any other business matters.

Taking on leased premises is undoubtedly a complex process that will be a considerable cost to your business; for this reason, careful attention should be paid when taking on or negotiating a lease. It is important to get expert legal advice when taking on a lease to prevent you from later suffering from hidden liabilities in the lease and to ensure that the terms of the lease are suited to the needs of your business. See below for advice on negotiating a lease; if you are taking on a lease, rather than negotiating one, many of these points will still be useful.

Length of Lease:

• Ask for a lease that is less than five years and, if you are unable to negotiate a reduction, ask for the option to break the lease early.
• Decide if you want a break clause in your lease. If you choose to include one, make sure it is not conditional on full performance of obligations stated in the lease as this means the landlord can refuse the break if you have not followed every single term in the lease.
• Consider whether you will want to pass on the lease at some point in the future and plan how you would vet a new tenant, e.g. check if they are financially sound, as you will probably still be liable for rent and other obligations if you pass on the lease.

Costs:

• Get an independent surveyor’s view of the typical rate for the type of premises and location.
• Determine if and how your rent could be increased during your lease, this commonly happens after the first five years of a lease. You may want to negotiate for the rent to decrease if the market goes down.
• Find out if you are being charged a specific amount up front, this tends to happen only on a very unusual property. If you are going to be charged, consider a valuation to see if it is reasonable for you to pay this amount.
• If you are planning on improving the premises see if you can incorporate this into the lease, i.e. a rent-free month in return for specified improvements.

Important checks you should make:

• Your VAT registration status, if you are not VAT registered then VAT may be added to your rent.
• The planning permission for intended use, it is your responsibility to check whether consent is required.
• Who is responsible for the repairs to the property? Try to limit your liability when negotiating the lease and, even if you discover you are not responsible for repairs, see if you are required to pay any services charges.
• Whether the lease allows you pass it onto someone else and if you are able to sub-let.