If you are looking to lease out a commercial property for the first time, you will need to make sure you have done enough research so that if something goes wrong, you have the assurances in place to deal with it. Commercial property is often a significant investment, so it is important to get it right first time. Here are some basic considerations.
Have an expert lawyer or property agency draw up and negotiate the lease
First and foremost, the lease is the legally binding agreement between you and the tenant and it will outline the terms of the tenancy. While drafts for basic terms are available, a lease will change depending on the clauses agreed between the landlord and the tenant. The basic terms include the duration of the tenancy, what rent is paid, how frequently the rent is paid, the agreed landlord and tenant responsibilities, and any break clauses.
Because this is a legal document, it is very important for both parties to get independent advice.
Be clear what the tenant plans to use the property for
Commercial property can be used for many types of business operation, from retail to warehouse, office space to a factory. Make sure you are fully aware of what the tenant proposes to use the property for before negotiating.
It should also be agreed whether the tenant plans to make any alterations to the property to accommodate their business, as damage could affect the value of the property. The tenant should record any changes they make.
Are you covered?
Depending on the clauses in the agreement, you may be required to take out landlord insurance. If this is the case, you will need to ensure that your tenant’s use of the property doesn’t invalidate your insurance. For long-term leases, it can sometimes be the responsibility of the tenant to cover the insurance on the property. If your tenant is responsible for taking out insurance, ensure that they have appropriate coverage in place.
Property management
Some landlords will provide a facilities management service, depending on the type of property. This is where the responsibility for the basic functions of the property, such as hot water, plumbing, and electricity, is assigned to the landlord. This can be advantageous for both the tenant and the landlord. The landlord can have peace of mind knowing that he is in control of the standard of care taken at the property and that he will be aware of any issues. For the tenant, it means that should a problem arise, it can be expected to be taken care of through the service charge payments. This also saves time, as they can focus on running their business.