The majority of businesses need commercial premises to operate from – whether small or big business – and many choose to rent at the expense of buying their own property. For these commercial tenants, there is a whole world of laws and regulations to navigate which are not typical of private residential leasing. As a first time commercial tenant or even a veteran, a number of common problems can arise as a result.
Here at Roger Hannah & Co, we are dedicated to helping the needs of both the landlord and tenant. There are always two sides to any issue, so we work to resolve issues with this basic principle.
With that in mind, what are the biggest problems you could find as a commercial tenant and how can you work to avoid them?
If Your Business Suffers a Downturn
One of the biggest issues that cross the mind of many businesses before and during a lease is what happens if you were to suffer a downturn? What do you do in terms of a lease you can no longer afford?
Leases are fixed term, granted for a number of years in accordance with your agreement with the landlord. The only way to be released early from such a lease is to have current or prior agreement from the landlord to break the lease which is not always possible. If this is not possible, then you will have to consider sourcing a replacement tenant to take over your lease.
If no solution is found, then you are bound to complete the lease to full term. Including all financial obligations such as rent, utilities, etc. even if you have vacated the premises.
One other solution to a problem of cash flow is the subletting (also known as underletting) of a rented property. Permission from the landlord is needed to sublet.
Overall, if you can negotiate with your landlord terms then subletting could be a reasonable solution to any cash flow problems you may face.
Outside of rent, there may be other costs that you are obligated to pay. Especially if you are renting an office in a much larger building. Maintenance and upkeep of the building as a whole is a responsibility of the tenant to contribute towards. This includes structural walls, roofing, reception areas and other areas of the property which are common use.
This is commonly known as a service charge. It can also come with the need to pay an insurance premium, which covers damage or loss of rent for the landlord if the premises were to become unusable (as a result of any damage).
To avoid this becoming an issue you should agree to any service charges prior to signing a lease, especially if you are worried that the costs might be too much. When leasing a shared commercial space also check for such charges prior to renting.
If you were to discover a serious issue in your commercial property then you might expect it is your landlord’s responsibility to repair it. However, many landlords will expect it to be the responsibility of the tenant.
In fact, if you agree to a full repairing obligation in your lease then you could find yourself paying for damage that pre-dates your tenancy. To avoid this you should try to agree with being able to leave it in no worse state than which you found it. Surveys prior to entering a property and presenting the findings to the landlord are advised for this reason.
If you have any questions regarding your commercial lease, then our lease advisory team have the expertise you need to be able to deal with matters quickly and efficiently.