LATEST TWEETS

Droopy eyelids, muscle weakness, impaired vision and problems speaking, swallowing and breathing are just some of t… https://t.co/zjTsD3Zwu1
Legal considerations when you build a granny annexe https://t.co/84vjxA0Kx7 https://t.co/nXfRY2PcUz
RT @rights_net: The Supreme Court has declared that the extent of GCHQ powers to hack into internet services should be subject to judicial…
RT @rights_net: More than 14,000 data breaches have been logged in the UK since the introduction of the GDPR a year ago. NetRights can brin…

Taking your first commercial lease

Some of the world’s most successful companies have started at home or in a garage, but at some point it makes sense to move to business premises.  Committing to your first commercial lease is an important step in the life of a young business and as it is a binding legal document, it is vital to get legal advice before you sign.

‘Premises will make up a significant part of your total business costs’ says Ben Mitchell, Commercial Property Solicitor with Parnalls Solicitors, ‘so it is important to know exactly what you will be paying, your obligations and those of your landlord, and what flexibility you have if these premises no longer meet your needs.’ Your solicitor will explain everything and help ensure that you understand the long-term implications.

The premises

The nature of your business will dictate the type of premises, the facilities and the space which you need – whether retail, industrial or office space.

Flexible shared office space is now widely available.  This can be a great option for a new businesses, because you can sign up for the space you need, ranging from a single desk to a whole floor of a building.  The monthly payments will usually include rent, business rates, services and utilities.  Flexible space means you know what you will be spending and allows you to expand or downsize easily but contracts vary, so you should get your solicitor to explain all of the terms to you.

If you opt for a conventional lease, the arrangements and documentation will be more formal.  The lease will identify the area being let to you, usually with an outline on a plan and a more detailed written description.  If you are taking a stand-alone unit, the lease may include the whole structure and exterior.  If you are taking a small part of a larger office block or a unit in a shopping centre, your lease will be ‘interior-only’, which means that it will not include any part of the structure or exterior.  It will include internal wall surfaces and some parts of the floors and ceilings.  Doors, windows and window frames are also usually included.  It is important to ask your solicitor to explain exactly what you are responsible for.

You need to be clear about what is included in the lease and which other areas you will be allowed to use, such as access routes, fire escapes and common areas like lobbies, bathrooms, lifts, staircases and car parks.  You should check whether you will be allocated designated parking spaces or simply given the right to park in whatever spaces are available.  If you need to put any equipment outside the premises (for example, a sign on the wall), your solicitor will need to discuss this with the landlord.

Length of lease

One of the hardest things for a young business to predict is how quickly it will grow and the impact on space requirements.  Some shared office facilities make it easy for startups to scale up and move from a shared desk to progressive larger offices.

If you are manufacturing, is it better to get more space than you need at the outset and sublet the space that you do not need in the short term?

The lease will be for a fixed period.  If you want the flexibility to end it early, your solicitor may be able to negotiate inclusion of a break clause.  If you are in breach of your obligations, your landlord may be able to apply to court to end the lease early.  Otherwise, if your business needs change, your only way out will be to find someone else to take on the lease or negotiate with the landlord.

Rent and other costs

Rent is usually expressed as an annual amount payable in four quarterly instalments, although your landlord may be willing to agree monthly payments for smaller premises.

Other costs like business rates, insurance, utilities, internet and services provided by the landlord may be included or you may need to factor these in on top of your rent payments.  The key is to make sure your solicitor has explained what costs you will have to pay on top of the rent, and whether VAT or stamp duty land tax is payable.

The lease may say that the rent will be increased at fixed points during the lease.  For leases longer than five years, rent will typically be reviewed at the end of year five.  For shorter leases, rent may be reviewed annually by reference to the rate of inflation.  Rent can also be reviewed in accordance with the rent that would be payable on the open market.  Depending on the nature of your business, the rent may also include a proportion of your turnover.  This is most common for shops and food and drink outlets.

Bear in mind that you may have to pay a rent deposit to the landlord at the start of the lease.  This is typically three to six months’ rent.  The landlord will be able to draw on this if you do not pay rent or fulfil your other obligations but it will otherwise be returned to you at the end of the lease.

Your obligations

The lease will set out a list of things you must do and some things you must not do.  The key obligations will be:

  • to pay the rent and other agreed costs;
  • to maintain the premises that are let you to, except where damage is covered by the landlord’s insurance;
  • possibly to contribute towards the repair and maintenance of any parts of the building that are not let to you (e.g. the roof and structural walls);
  • not to alter the premises without the landlord’s consent;
  • not to transfer the lease or sublet the premises to anyone else without the landlord’s consent and not to share them with anyone else unless the lease says that you may;
  • not to use the premises for any illegal purpose and only to use them for the use set out in the lease; and
  • to leave the premises at the end of the lease in a good state of repair and empty, so the next tenant can go in without delay.

Forewarned is forearmed

Your solicitor is there to make sure you understand the obligations you are taking on and that the premises will meet the needs of your business.  With the benefit of good advice, you will avoid unexpected costs and maintain a good relationship with your landlord.

For further information, please contact Ben Mitchell, Commercial Property Solicitor with Parnalls Solicitors on 01566 772375 or email mitchellb@parnalls.com

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

 

MORE NEWS

The death knell for ‘kiss and tell’?

Making a will when you retire

Selling your property at auction

Not looking so good - your guide to compensation for botched non-surgical cosmetic procedures

New threshold of seriousness in defamation proceedings

Legal considerations when building a granny annex

Choosing the right person for your power of attorney

Formal Interviews - Do you need legal representation?

Privacy rights and aerial images

Trustees’ duty to give information to beneficiaries

Five problems with a leasehold property

Taking your first commercial lease

Is your organisation protected from employee social media legal risk?

Have you been targeted by negative social media posts?

Farmers be alert when being inspected

Help for House Sellers?

Don’t let your digital assets end up in a digital grave

Valuing an estate for probate

Development proposals and your local authority search

What can you do if your child is injured in a serious accident

NetRights welcomes new protection for social media users

SHOULD I GET A LAWYER FOR A SPEEDING OFFENCE?

Supreme Court recognises that social media is a “casual medium” in libel battle

Choosing the best conveyancer who is right for you

Making a will after a second or subsequent marriage

Option or promotion agreement – which is best for landowners?

Anonymous pub and restaurant online reviews leave a bad taste

Have you had an accident involving a horse?

Help to Buy – beware of some cracks in the structure

Understanding Lasting Powers of Attorney

Changes to Energy Performance Certificate for Landlords

Had a cycling accident? Your route to obtaining compensation

New year, new home: tips to sell your home in the New Year 

Tax Planning for your inheritance

Hearing loss: when your employer may be liable

Buying a home for your retirement, five things you need to consider

Farmers plan to diversify after Brexit

Ministers press ahead with probate fee shake-up - reports BBC News

Botched dental treatment? You may be entitled to compensation

Why a Health and Welfare Power of Attorney is a good idea

Will the new charge on building developments in Cornwall affect you?

Energy Performance Certificates – Do They Matter?

HMRC Challenging Stamp Duty Land Tax Payments

Ben Mitchell qualifies as a solicitor

The potential implications of Brexit on employment law

Appointing a guardian for your children

Houses in multiple occupation – new rules from October 2018

New Agriculture Bill published

Will Brexit affect my pension?

Dreaming of a holiday home? Sort out the legals before putting your feet up

Lasting Power of Attorney by Deborah Adams

Settled status after Brexit by Alexis Hager

How to choose an executor to administer your estate when you die

How overage agreements can boost profits from your land

Top tips for first-time buyers

How Could Brexit Affect My Farm?

Wills & Succession in Spain by Deborah Adams

Brexit ­– an international and local view by Alexis Hager, Litigation

Capital gains tax - important facts for non-residents of the UK

Buying a home: the importance of making sure the seller is entitled to sell

Changing a will after someone has died: it is possible and it could save you money

Your responsibilities when you have people working in your home

Sad passing of Battle of Britain pilot who served with Parnall family member

Considerations when buying a heritage property

Disciplinary proceedings at work: guide for employers

Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.

Selling your land through a conditional contract

Why you should always use a solicitor to prepare your will

Putting your legal affairs in order

How to extend a lease on a flat or buy a share of the freehold

Delayed Health Checks

New Marketing Team at Parnalls Solicitors Ltd

Social media: snooping in the recruitment process

A landlord's guide to tenant alterations

Equity release, your questions answered

Short term lettings: avoiding the pitfalls

How to apply for a grant of probate

Are you entitled to a fee refund for your Lasting Power of Attorney?

What to do when someone dies

Business disputes: can they ever be avoided?

Accident at work: what to do and when if you have been injured

Director appointment

What type of will do I need?

Business rates: a financial ticking time bomb (Part 2)

Conveyancing quotes: what you need to know

New appointment in Litigation

Property boundaries and rights of access: what are they and why do they matter?

Mental Health - we can get you the help you need

Business rates: a financial ticking time bomb (Part 1)

Leaving a gift to charity in your will

Parnalls helps two leading Devon organic meat companies to become one

Katherine Flashman Kitson is appointed Governor of St Joseph's School, Launceston

Financing your home purchase (Part 2)

New rules on debt recovery may delay payment of consumer debts

Making financial gifts during your lifetime (Part 2)

Our Guide to Lasting Powers of Attorney for Your Business Interests

Financing your home purchase (Part 1)

Careless replies to pre-contract commercial property enquiries could land you in trouble

Making financial gifts during your lifetime (Part 1)

Property referrals and recommendations - what to consider

World Alzheimer’s Day: Three-step plan to get your legal affairs in order

Legal considerations when setting up a business (Part 2)

How to avoid falling victim to property fraud

What are the key terms that need to be covered in a commercial lease? Part 3

Top 10 reasons to use a solicitor to make your lasting power of attorney

What legal considerations do I need to think about when setting up a business? (Part 1)

Why you need to update your will as soon as you decide to separate or divorce

What are the key terms that need to be covered in a commercial lease?  Part 2

The Bank of Mum and Dad: top tips when lending money to your children  

DON’T ACCEPT 50/50 ON AN ACCIDENT IN A COUNTRY LANE

The importance of insurance when life trips you up

The role of a court appointed deputy

What are the key terms that need to be covered in a commercial lease?

Ten common debt recovery mistakes

How do I know if my relative has the mental capacity to make a will?

Motorcycle accidents - what to consider when claiming compensation

Top tips for pushing your house purchase through as quickly as possible

How does the new inheritance tax perk work?

The ultimate personal injury and accident claim checklist

Jargon-busting guide to Lasting Power of Attorney

10 reasons to appoint a Personal Injury solicitor

What happens when mum or dad are ill and can’t make decisions?

How firms can take advantage of the rise of alternative finance

Should Stamp Duty be abolished?

Teenager paralysed after falling off a horse awarded £3 million in compensation

RBS to pay investors £800 million

Not happy with your accident claim lawyers?

Parnalls expands its litigation team

Hard work pays off for our Trainee Legal Executive.

Katherine Scott Flashman Kitson celebrates 20 years

How will the new Residence Nil Rate Band (RNRB) affect you?

Exciting new business hub unveiled in North Cornwall

Be careful what you post on Facebook

Parnalls rolls out the support at Wadebridge Wheels

New trainee solicitor appointed

Mark Parnall comments on Brexit in The Law Society Gazette