Commercial leases – negotiation

No matter what the relative bargaining powers of landlord and tenant, there is usually room for at least some negotiation of a commercial lease. So, if there is anything in the document that you’re not happy with it’s always worth suggesting an alternative. In particular, look out for provisions that are not ‘market’ i.e. that you wouldn’t find in another commercial lease, and try to identify anything that you think is missing. This is where legal advisors come in particularly useful. Commercial specialists will be able to take a view on what market provisions are and what is worth negotiating.

What can you ask for?

There are a couple of standard requests that are always worth asking for. Whether you are successful will depend on factors such as the bargaining position you have, the market in general and how much the landlord wants to rent to you. For example, you could ask for a rent free period. Landlords won’t want to pay business rates on empty properties and so would rather offer a rent free period than have no tenants. Another common request is a break clause – this will give you an opportunity to bring the lease to an end earlier than the length of its term by giving the landlord notice. Whether the landlord accepts this will depend on the factors mentioned above – the landlord may require a higher rent for this kind of flexibility.

What should you watch out for?

Some landlords have been wording leases so that tenants pick up all the legal fees. This is not a standard clause and not something tenants should accept. Most leases will contain a rent review clause that will allow a landlord to review – and increase – the rent. It’s often worth negotiating wording that allows the tenant to challenge this too on certain grounds. One of the trickiest areas for tenants is that of repairs. The best case scenario is a lease that requires the tenant to leave the property as they found it. In this situation, it’s important to have a Schedule of Condition that provides evidence of what state the property is in at the start of the lease. If there are repairs you think should be carried out before occupation then now is the time to mention them. Bear in mind that you can object to being responsible for all repairs and try to limit the obligation to just interiors, rather than exteriors too.