5 Top Tips to Negotiate a Favourable Retail Lease

You might have found the perfect retail unit in the perfect location – but don’t crack open the champagne just yet. One of the toughest steps in the process is still ahead, and the deal still might not go through. It all depends on how well the lease negotiations go, and what kind of deal you can get in the process.

This is a tricky business, especially if you’re new to the commercial property game. There are far more nuances and technicalities than in a residential lease, and a lot more at stake. There are some key things to bear in mind if you’re going to get favourable terms, which we’ve laid out in this essential guide.

A commercial lease comes with a number of liabilities and obligations, in the case of rent default or administration. If you take out a lease as a private individual this may fall on you personally, so it’s wise to have it assigned to a limited liability company that you set up. If you’re taking a property for business purposes the chances are that this is already the case, but some shop owners still put a lease in their name, and often pay the price.

There are a number of things left open in a lease when you start out, which need to be clarified both by the tenant and the landlord. Many of these won’t come up unless you ask – such as rent-free periods, which landlords will often offer in order to get a tenant in. Remember that nothing is set in stone; if a landlord offers you a standardised contract, you can always negotiate.

One of the things that tenants overlook – because they’re not thinking this far ahead – is what happens if they need to leave a property earlier than expected. Almost all leases include what’s known as a break clause for this eventuality. And this can always be negotiated to bring the break clause onto more favourable terms.

Lease negotiations often focus around who is responsible and liable for what – the cost of repairs to a building is a big one. Try to ensure that you are not going to be forced to pay for all the costs of maintaining a building, inside and out. Generally, retailers will agree to pay the costs of wear and tear to the interior and a landlord will take care of the exterior or structural costs. Either way you can insist on a ‘schedule of condition’ report to make sure you have a clear picture of the state of a building before you take the keys.

Very few business people have an expert understanding of commercial property leases. And while it’s a big cost to hire a solicitor or surveyor to do the negotiating for you, it will be far more expensive to try to do it all yourself. Seek advice from start to finish, and don’t sign a lease without consulting the experts.

This article was originally published on Realla on 17 June 2019.