Most retailers, at least those in the early days of trading, tend to avoid tying up capital by renting premises instead of buying. And whilst their focus might be on the exciting new business venture itself, they would be wise to give their commercial lease contract full care and attention, to avoid any unwanted surprises at a later date.
A commercial lease works similarly to a residential one. The landlord will provide a lease document, often dozens of pages long and tightly worded, covering every conceivable eventuality. However, the rights and responsibilities of a commercial tenant often differ from residential properties. A commercial contract does not have a cooling-off period as consumer deals do, so it’s important to fully understand exactly what is being signed beforehand.
Caught up in the excitement, anticipation and perhaps time-crunch of securing a location for a new shop, many retailers do not seek preliminary legal advice. But once they sign up for a commercial lease, they are on the hook for pretty much everything – the responsibilities of tenancy kick in immediately and permanently.
What are the duties of a commercial tenant?
The lease document will lay out exactly what the tenant of the property is responsible for. This can encompass liability, repair obligations, the landlord’s right to inspections and even rules for interior and exterior decor, such as specific paint colours – which could be tricky if they aren’t in keeping with the retailer’s brand.
When it comes to repairs, the tenant must keep the property in a good state, despite the condition of the unit at the start of the lease. This can catch some retailers out when renting a property that has problems, concerns or disrepair from the offset, as they usually will be required to restore it to a good state at the end of the lease, despite these issues occurring before their tenancy began.
Is the tenant free to use the premises as they see fit?
Depending on the type of business, the tenant may wish to make aesthetic changes to the premises. For example, a retailer opening a storefront will likely want to design both the inside and out to visually represent the business.
Other businesses may require more intensive work to set the unit up for their services. Food retailers may need an entire commercial kitchen fitted and services like a hairdresser may need bespoke furniture and plumbing fixtures.
Some landlords will have strict rules about what can and can’t be altered, whereas others may be more relaxed on this front. Before signing a lease, a tenant should have in mind any changes, both big and small, that they wish to make to the property. Once the lease is signed, it is not easy, nor cheap, to terminate it early, so if the property cannot be modified in a way that suits the business, the tenant is out of luck.
Prevention is better than cure
When it comes to business affairs, nothing should be taken lightly, especially a commercial lease agreement. Most retailers will not be experts in commercial property law, but the landlord likely is and if he/she is not, they are more than likely to have a legal consultant dedicated to this sole purpose. Their priorities will be very different to those of a tenant, and it’s important to remember that a lease will be written in a way that protects the landlord and their property, less so for the benefit of the tenant.
Prospective tenants should enlist the help of a solicitor who is experienced in commercial property law to guide them through the process from start to finish. Not every problem can be avoided, but knowing in advance what these potential problems could be, can help in making an informed choice when deciding if the property and lease are right for the business.
The solicitor should be provided with the unsigned lease, along with any related documents. They may suggest working with a commercial surveyor too. These two professionals can advise the tenant on the ins and outs of the lease, providing support and advice about what everything means and what the risks, costs and liabilities will be if the lease is signed.
Between the solicitor and the surveyor, changes and revisals to the lease can be put forward to the landlord. This could be putting limitations on repair charges or rent increases, or adding lease termination options. This may go back and forth a few times whilst the landlord negotiates their preferences, but once both parties have agreed, it can be signed. From this point, the lease is binding.
Navigating a commercial lease can be a laborious process, but a well-negotiated lease can be the baseline for a future of profitable trade, expansion and business development.
Prevention is always better than cure. Enlisting the support of a solicitor early on in the process can prevent risks and unnecessary costs, as once the lease is signed, there is no cure.
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John Roberts is a Partner and Director at Austin Lafferty Solicitors. John has been with the firm for almost 20 years, with experience in all areas of business law.
