Unless the lease is protected, which provides security of tenure, sooner or later – whether you are a tenant or a landlord – you are going to have to renew the terms of your lease. But what is actually up for negotiation?

Maunder Taylor offers expert business lease negotiations advice to clients across North London; here we look at the terms of standard commercial leases which can be varied.

The Rent Itself

The key here is to look at the current market, and to work out how much the rent is for comparable properties (both in terms of the size and the use it’s being put to). In the immediate post-Covid era, tenants were in a stronger position than they are now. Remember there may be specific local market conditions, so, whether you are a landlord or a tenant, do as much detailed research as possible before you enter into any negotiations.

The Duration of the Lease

Commercial leases generally last between five to ten years, but the length will vary depending on the needs of the tenant, and, to a lesser extent, the landlord. Start-up businesses generally prefer shorter leases to give them more flexibility should they wish to expand; established businesses (and landlords) generally opt for the certainty of a longer agreement.

Subletting the Lease

In some circumstances, tenants can ask to transfer or sub-let the premises to another leaseholder. The landlord can stipulate conditions (such as requiring that the rent is up to date, and the new tenant is in a good financial position). The key is that any grounds for refusal must be ‘reasonable’.

The outgoing tenant will usually be required to enter into a statutory guarantee with the landlord to guarantee the incoming tenant’s responsibilities.

Rent-Free Periods and Break Clauses

Rent-free periods are generally offered by landlords at the start of a new lease; this incentivises new tenants to move in, by stipulating that the rent isn’t due for a certain number of months. This is particularly helpful if the tenant needs to spend money in other areas (for instance refitting the premises to make it more fit for purpose).

Break clauses can also be added to a new lease agreement; these allow the parties to terminate the contract early by giving an agreed period of notice. These clauses can work one way, or both ways if it can be mutually agreed.

Some new leases also allow for the rent to be reviewed on a regular basis in the future.

The Responsibility for Repairs

This is often one of the most hotly contested clauses in any business lease renewal as both parties usually try to pass on any obligation for repairs and maintenance to each other.

From a tenant’s perspective, it may be worth having a Schedule of Condition drawn up which ensures that they don’t have to leave the property in a better state of repair than at the start of the lease. From a landlord’s point of view, if they are to assume responsibility for repairs and maintenance, they may try to recover the cost through a service charge. Prudent tenants should try to place a cap on this.

There may also be some room for manoeuvre when it comes to making minor alterations to the property. Most commercial leases prohibit making major structural changes, but the tenant should be prepared for the right to make small internal modifications.

Business Lease Negotiations Advice in North London from Maunder Taylor

Whether you are a landlord or a tenant, at Maunder Taylor we would encourage you to foster a good relationship with the other party, as this makes business lease renewals a much more straightforward (and potentially less time-consuming and less expensive process). We would also encourage both parties to think about lease renewals at least 15 months before the existing contract is due to come to an end.

If an agreement cannot be reached, then we can act as expert witnesses either at a County Court or an arbitration panel. This can include giving independent valuation evidence as we are also expert property valuation surveyors in Potters Bar, Totteridge, and across Hertfordshire and North London.

For more information about our business lease renewals service, follow this link.