Dudley Solicitors

What general factors should I consider when thinking about negotiating or renewing my business lease?

First and foremost, business factors.  You need to ask whether the premises are suitable for your business in the present and in the foreseeable future. If you foresee a strong period of growth, for example, you may have to move into bigger premises in the future, but the cost of breaking a contract you sign may outweigh any benefit to be gained from different premises.  This clearly represents lost opportunities and revenue.  Leaseholds can last many years, so you have to carefully weigh up whether it is worth negotiating on and renewing the lease or not.  Property costs tend to be the one of the most expensive overheads for a business, so it worthwhile fully considering your options and seeking appropriate professional advice.

Specifically with regards to the premises, what should I consider?

Aside of what has been discussed above a few basic things need to be asked:

• Are there enough parking spaces?
• Is the place safe i.e. are there fire exits?
• Does the building have access to basic telephone, broadband and other telecommunications?
• Will there be 24 hour access?
• Do the premises have a toilet and kitchen that is sufficient for staff and customer usage?
• Are there any planning permissions related to the property or the surrounding area?  If so, you might not be able to use the premises as intended.  Checks can be made through local authorities.
• Is the building a historic or listed building and will this affect your intended usage of the premises?
• Are the premises satisfactory for compliance with disabled access requirements ?

What should I check when inspecting the property?

Unless you have a love of DIY and not getting value for money, you need to make a thorough check of the property to ensure you will not have to carry out any major or costly repairs, should your obligation to do so be part of the contractual terms.  You should check the general structure of the building as well as ventilation, drainage and electrical systems.  It makes sense to invest in the services of a surveyor to do this if you have adequate resources.

What things should I consider when negotiating the best deal possible?

Firstly, do not rush into the deal or make it known to the landlord that you do not have any other choice.  This will automatically weaken your bargaining position.

Plan well and allow plenty of time.  Property transactions, by virtue of their complexity, can take time, so it is important that you allow plenty of time for the transaction to be completed and do not plan other parts of the business (marketing plans, recruitment cycles) based on your ideal move-in date.

Consider who is responsible for the up keep of the building and if you are responsible, whether it is reasonable to take on this obligation with reference to the state of the building and any checks made by a surveyor.

Know that you have a right to negotiate the terms of the lease!  In leaner times, many commercial premises are unoccupied making now a prime time for getting a bargain. The Commercial Property Code of Practice is advocated by tenant pressure groups and major landlords and is designed to promote business lease flexibility.

Why should I consider stamp duty land tax when negotiating my lease?

For the simple reason that it could be costly not to.  This tax, which replaced standard stamp duty in 2003, taxes on the basis of the value of the total amount of paid across the lease’s duration, making longer leases even more costly.  Again, a cost-benefit approach needs to be taken i.e. “will having a lease of X duration represent benefits to the business that offset any costs of having a lease of X length.

We hope this page has been useful, please do now visit the commercial property law page.