If you run a successful business from home, you may be considering a move into dedicated business premises, but buying a property is sometimes too big a step at this stage. Taking a business tenancy is more flexible and less of a commitment than buying, but it comes with responsibilities as well.
The draft lease
When you’ve found a suitable place, the landlord, or probably their solicitor, will present you with a long and wordy document, the draft business lease. At this stage you may want to consult lawyers of your own, because the language of the lease isn’t always easy to comprhend. You have to do your best to understand it anyway, as nearly all the rights and duties as between you and the landlord are set out there. There’s a great deal of freedom for parties to commercial leases to agree to whatever terms they want and there’s little protection for a tenant who makes a bad bargain. You are presumed to understand any document you sign.
The Lease is bound to contain clauses which sound alarming and objectionable. For example there will probably be a clause giving the landlord the right to enter onto the premises, even with force, and seize your property in the event of late rent payment. In fact, that clause is standard. It’s there to preserve the landlord’s right to act without a court order in non-residential tenancies.
Amending the draft lease
In theory, all of the clauses in the draft lease are negotiable, so you should feel free to suggest any changes you would like to make. The worst that can happen is that the answer is no. If it’s a full tenant’s repairing lease, then you may want to suggest a cap on your liability for repairs, particularly if the term is only a few years. You should look at the wording of the repairing clause carefully, to make sure there is no obligation for you to put the property into a better state than it was at the outset of the lease.
Rent and service charges
The tenant’s first and most important responsibility, as far as the landlord is concerned, is to pay the rent plus any additional service charges set out in the lease. If the lease is for more than three years there will probably be a rent review clause. Read that through carefully and make sure that you understand and are comfortable with it.
You should check that the landlord doesn’t have too much discretion in setting service charges. If you are the only occupant of the property you may prefer to organise and pay for services yourself rather than allowing the landlord to arrange things and then send you the bill. As the payer, you will be motivated to find the best deal, unlike the landlord, who can pass the cost on. He may just give the work to someone he knows without bothering to look around at all.
Try to keep control of the insurance too. If the landlord insures and the tenant picks up the bill, there’s no incentive for the landlord to shop around for the best deal. Depending on the type of business you operate, you may also find that this insurance doesn’t provide you with comprehensive cover and may only cover the landlords buildings and contents, leaving you vulnerable. It’s always better to arrange your own business insurance policy.
If the landlord insures, you should check that there is adequate liability cover, including cover for claims under the Occupiers Liability Act. The law provides that the occupier of a building must make sure the building is safe for other users. The reason the occupier rather than the owner is held liable is simply that it’s easier to trace the building’s occupant than its owner. So if the landlord insures, check that there is proper liability insurance, or it’s you who could be paying out for any claims.
So what are your rights as a tenant? Not much more than the basic right to occupy the property peacefully in return for the rent. There are statutory provisions allowing business tenants to renew leases that have come to an end, but landlords are can exclude them in any particular case. That must be done before the lease starts, though, and proper notice must be given to the tenants so that they know they are giving up their legal right to renew the lease.
Otherwise, your rights are only what the lease says they are, so the message is always to make sure that you understand what is said in the lease. And ask for anything you aren’t happy with to be changed.