Get the best from your business lease when renting business premises with our top tips to help you negotiate a rental contract.
Avoid hasty business lease decisions
It’s best to start looking for new office space at least six months in advance so you have plenty of time to research premises and then negotiate terms for your chosen office space. A shortage of time or pressure to move may cause you to rush into a hasty decision and agree to unfavorable terms. Meet the landlord or their agent face-to-face – this may help you get favorable terms by ensuring a good relationship. Avoid showing too much interest initially in your selected office space to ensure a strong negotiating position. Ensure you’ve alternative options and be prepared to walk away from an unfavourable lease, no matter how perfect the office space is.
Know the full office rental costs
The more you know about comparable rents for similar properties, the stronger your negotiating position. Call several agents and leasing companies to discover typical rents for office space in your chosen location.
Usually the stated rent shown on the lease is not the final rent you will pay. Allow for additional costs and fees. For example, the landlord most likely will charge VAT on top of rent, which you need to budget for. Consider too the deposit you’re required to pay. Many offices require only one month’s rent in advance, but some landlords may charge three to nine months’ rent as a deposit.
Remember too there’s generally room to negotiate rent. Negotiate the smallest number of months’ deposit required. Often rent will increase every year, so negotiate a limit for the rent or a fixed amount the rent will increase by. You can also try to negotiate a period of free rent.
Check business premises lease length
The length of your rental lease can have a significant impact on the success of your business. If your lease is too long, you may be forced to stay in premises that no longer suit your business. Yet, if it’s too short, your business may be negatively affected by an office move. Longer leases, however, are beneficial for location-dependent businesses. Ensure that your lease is renewable. The Landlord and Tenant Act 1954 gives a tenant the right to apply to court for a new lease at the end of the term. Some rental leases however do not allow this, and you may be evicted at the end of the term. In this case, opt for longer terms so that moving won’t harm your business.
Look for a lease exit clause
It’s difficult to predict the future of your business, but an exit clause in your rental lease gives you the flexibility to leave your current premises should the need arise. Some landlords may allow you to break your rental contract as long as you give them a certain period of notice such as six months. Resist a mutual break, otherwise the landlord may also be able to exit the lease and force you to move, which could be damaging to your business.
Negotiate rent reviews
Landlords will initiate rent reviews, and your rent will most likely increase following these. If possible negotiate long time periods, such as five years, between rent reviews, so you can accurately complete business plans and forecasts without being blindsided by sudden rent increases.
Get legal advice
It’s best to get legal advice before signing a rental contract for your new business premises. Ask a lawyer to read the rental lease and explain any terms in the contract that you’re unfamiliar with. That way, you won’t be surprised by unforeseen terms and clauses that affect your business at a later date.
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.