How To Avoid Mistakes With Your Commercial Lease
Leasing a commercial space for your business has very little resemblance to renting a home. Both the landlord and tenant have varied obligations, with the leaseholder taking on more responsibilities than you would see in a dwelling contract. If this is your first startup, be sure to check out our post on early stage support and advice as well.
Once you have signed on the dotted line, it’s too late. It’s a done deal. So, be prudent in your research and enlist the assistance of a solicitor specialising in commercial law contracts. This will ensure the commercial lease is a proper representation of your intentions and capabilities.
Here are a just a few ways to avoid future difficulties – before signing your commercial lease:
Breathe In, Breathe Out
Don’t hit the panic button. Landlords can sense desperation a mile away. If you’re in a hurry, tell them, “I’m looking to open the doors in one month, and I have several properties that I’m considering.” This puts a ‘sense of urgency’ in the air – this is a good thing. It says you are a serious tenant and not wasting their time. It also lets them know their space is only one of many you are considering.
Planning too far in advance can be bad for negotiations, and it doesn’t excite a landlord who is losing rent on an empty unit. However, there are many facets to opening a new store; especially if you are building out the unit to suit. So stay calm, and get your ducks in a row. Being aware of the steps and challenges ahead of time will make the process a lot less stressful – as will scheduling an initial consultation with an expert in business and commercial law.
Ask for the Opinions of Your Staff
If the location you have in mind puts a strain on the commute of your employees, be prepared to lose some valuable workers. Not everyone is willing to make the sacrifice, not for long anyway. Including your staff in the planning stage will instill even more loyalty, and their input could be priceless at the end of the day.
Think about positioning the company close to conveniences for yourself as well as the employees (such as cafés and markets, and local suppliers of goods frequently used in your business). Ask for your workers’ take on the ease of access, the facilities provided, and whether they feel secure in the neighborhood.
Consider Your Future Growth
Ask about commercial lease turnover rates for other businesses surrounding your intended space. Will it be possible to take down a wall and expand? Can you lock in first option on a larger unit, or better location in the building when it comes open? Negotiate reasonable rent increases before signing; with economic confidence on the rise, your landlord may want to hike the rents.
If you are forced to relocate your business down the road, this could be a real detriment to your place in the current market. Customers tire of following you from one address to another, and postal changes also confuse your marketing – both in print and online.
Reasonable ‘Out Clauses’ are a Must
A commercial lease needs to have options for termination. Let’s face it, we don’t always have control over all the moving parts; things happen. At the bare minimum, you should have an option to sublease or to sell your business and assign the lease to the buyer. It is normal for the Landlord to be noticed in writing of any new occupant. But make sure protective language is in place, stating that the Landlord cannot refuse a reasonable request for such a change.
Another choice would be to draw up the commercial lease for a shorter term, with options to renew. Break clauses may give you specific dates to terminate early, but make sure any attached conditions are satisfied (such as notice, maintenance, timely rent payments, etc.) Be aware though, that when you let a property for a longer period it increases your opportunity for negotiating terms.
Handling of Asbestos Material
One of the most toxic products used in construction in the last century, asbestos exposure can lead to fast-growing cancer and death. Amongst the apportioned tasks of maintaining and repairing the property, make certain there is a specific clause as to how the discovery of asbestos will be handed. This role may lay with either tenant or landlord, or the managing agent.
If you should happen upon asbestos during renovations or installations, a record must be kept and the material has to be properly analysed. Any workers and contractors need to be notified, and a risk assessment must be carried out. Without a plan put into action, the responsible party could face a fine up to £20,000, and imprisonment for up to one year. For more details, see the Health and Safety Executive for England, Scotland and Wales and Northern Ireland.