Thinking of signing a new commercial lease in 2024? Don’t do it alone

Are you ready to sign on the dotted line on a new commercial lease? Don’t do it alone. Before you put pen to paper, make sure you understand all the ins and outs of your new lease. A lot can change in the next couple of years that could affect your business and your needs. With the economy recovering and interest rates possibly rising or remaining high, the terms you agree today may not serve you well down the road. This is why, having excellent commercial lease solicitors on your side who negotiates the best possible terms for your business will make all the difference.

Entering into a long-term commercial lease is a big commitment. Make sure you go in with your eyes wide open. The expert’s advice can help you avoid costly pitfalls and ensure your new space is the right fit for your business today but years to come.

The UK Commercial Property Market Outlook for 2024

The commercial property market in the UK is set for steady growth in 2024 according to experts. CBRE, a leading commercial real estate agent, expects investment volumes to increase by up to 5% from 2023 levels. Rents and values are also predicted to rise for offices across major city centres and industrial properties across the country.

For tenants, this means potentially higher rents when signing or renewing a commercial lease. However, with more investment comes greater choice and availability. If you start searching early, you’ll have the time to find the right property and negotiate the best deal. Some tips:

• Focus on high-growth areas such as regional cities where demand is outpacing supply. Places such as Birmingham, Manchester and Leeds may offer more opportunities and lower costs.
• Consider coworking spaces or shared offices. They provide flexibility and lower costs while still giving you a professional business address.
• Work with a broker to help you evaluate properties. They can advise you on current market rates for your type of business so you can make an informed decision.
• Negotiate the best terms possible, including options to renew, rent increase caps and who will be responsible for building insurance, maintenance and repairs.

The commercial property market in 2024 will likely favour tenants in some areas. Do your research, start planning early and don’t go it alone. With expert guidance from commercial lease solicitors, you can find an ideal space for your business at a fair price, setting yourself up for success and growth over year to come.

Common Commercial Lease Provisions

Commercial leases typically last 3-5 years, so you could be locked in for a while. The terms and provisions in these legally binding contracts are complex, but understanding the basics will help you negotiate the best deal.

The type of property and permitted use (use class) are key. Will it be an office, retail space, or warehouse? Make sure the lease allows the kind of business you want to operate. The length of the lease and options to renew or extend are also important to consider. A longer initial term may get you a lower rent, but less flexibility.

Pay attention to the rent amount and escalation clauses. Rent is usually paid monthly or annually in advance. Escalation clauses state how much the rent can increase each year – you will want to negotiate the lowest rent increases possible.

Responsibility for building maintenance and repairs should be clearly outlined. As the tenant, you will typically be responsible for rates and any leasehold improvements you make. But major structural or system repairs should be the landlord’s obligation.

There are many details to iron out in a commercial lease. Getting help from a commercial conveyancing solicitor who specialises in commercial property and lease agreements is a smart move. They can review the terms, explain your obligations, and help you get the best possible deal for your new premise.

Additional Matters A Lease Could Cover –

When entering into a new commercial lease, there are additional matters beyond just the rent obligations and the term of the lease. You will also need to consider the following with your commercial lease solicitors –

Permitted Use –

The lease should specify exactly what type of commercial (business) activity is permitted within the premises. If you plan to change or expand the direction of your business operation, you will want to factor in flexibility where change of such use classes are concerned.

Exclusivity –

Do you require exclusive use of certain areas such as storage, loading docks or patio spaces? If so these must be clearly set out within the lease. Doing so would prevent the landlord from granting access to those areas to other tenants.

Option to Extend –

An option to extend gives you the right to renew the lease for an additional predetermined term once the initial term expires. Additionally, this also avoids the need to move to a new location when you may just have built up a loyal customer base in your current location.

Break Clauses –

In contrast to an Option to Extend, a break clause acts as a get out clause for you as the tenant, before the end of the full term of the lease if things don’t work out as planned. The downside of a Break Clause however is that, it typically always comes at a price where the landlord equally receives a right to revisit the rent.

Subletting and Assignment –

If you later decide that you do not require the full extent of the premise you have leased, subletting clauses allow you to rent out part of your premises to another tenant. This way, you can subsidise some of your rent payments by offsetting these as income from another person who is renting part of your property. Assignment clauses on the other hand allow you to transfer the entire lease you currently have, to someone else. Make sure any restrictions on subletting or assignment are reasonable. An outright prohibition is not ideal.

Negotiating Favourable Terms With The Landlord When You are the Tenant

When negotiating the terms of your commercial lease with a landlord in 2024, you’ll want to go in prepared. Don’t just accept the initial terms offered. There is usually room for negotiation to get a better deal for your business.

As a tenant, you have more leverage than you realise. Landlords want to fill vacant spaces, so they may be willing to compromise to sign a long-term lease. Offer a lease of 3-5 years or more in exchange for reduced rent or a lower deposit. A longer commitment means more stability for the landlord, so use it to your advantage.

Do some research on comparable properties in your area to determine a fair rent. Politely but confidently explain that their asking rent does not match current market rates, and provide a few examples of lower-priced comparable listings as evidence. They may come down to meet a more reasonable number.

Negotiating the terms of a new lease is a two-way street. Be open to options that benefit both parties, not just yourself as the tenant. For example, offer to handle common area maintenance in exchange for reduced rent. Or propose an initial 3-year lease at a lower rate, with the option (as is commonly the case) for the landlord to review the rent at the next break clause.

With some reasonable leverage and a willingness to collaborate, you can negotiate favourable terms for your new commercial lease in 2024. Do your research, know your numbers, and look for creative solutions that meet your needs as well as the landlord’s. Don’t go into negations alone – get advice from a commercial lease solicitor to help you craft a strong offer. With persistence and a degree of compromise, you can get great terms setting your business up for success.

Protecting your business interests with legal advice from a Commercial Lease Solicitor.

Entering a commercial lease is a big decision that can have major implications for your business. Don’t go it alone. Seeking legal advice from commercial lease solicitors, specialising in commercial property can help protect your interests and avoid costly mistakes.

Do your homework –

Before you sign on the dotted line make sure you understand all the details of the lease and how they may affect your business. Commercial lease solicitors can review the lease in full and explain any confusing legal terms or clauses. They can also check that the terms are standard and fair, not overly restrictive, or one-sided.

Negotiate the Best Deal –

An experienced commercial lease solicitor can help you negotiate the best possible deal for your needs. They may be able to identify areas where the terms could be improved in your favour and will know how to effectively negotiate with the landlord or their representatives. With legal support on your side, you will feel more confident asking for changes to the lease before signing.

Consider the Long-Term Impact –

A commercial lease typically lasts several years, so you need to think about how it may impact your business well into the future. A commercial lease solicitor can provide guidance on issues you may not have considered, such as rent increases, renewal options, termination rights and more. They can suggest adding certain protections or contingencies into the lease now to give your business more flexibility and control down the road.

Protect Against Legal Issues with a Commercial Lease Solicitor

Without proper legal review, you could end up signing a lease that does not comply with regulations or fails to protect you in key areas. A conveyancing solicitor will ensure the lease is legally sound. They will spot unfavourable terms or clauses that could cost you in the long run and negotiate these on your behalf.

In summary, signing a commercial lease is no small feat. There are many moving parts, complex legal considerations and long term financial implications t weigh. The last thing you want is to go into the leasing process bling and end up locked into an unfavourable agreement for years to come. Do your homework, understand your needs and find an experience commercial lease solicitor to guide you through the process.

Why not contact Express Conveyancing’s Commercial Lease Solicitors to find out how we can help you with your next commercial property?