Q&A - What should I look out for before signing a commercial lease?

Q: I have a very small business which has now outgrown my front room.  I have been considering leasing a unit on a new industrial development around the corner. Is there anything that I need to be aware of before signing?

A: Firstly check what exactly is being leased to you. Check the property description in the lease, that the plan accurately reflects the space being leased, that you are being granted rights of access to the property and that the proposed use of the property is authorised. You should also look at the financial implications of entering into the lease.  Will the rent increase over the term?  Is VAT payable on top of rent?  Is there a service charge, if so is it fixed and what does it include?

Insurance will usually be arranged by the landlord but you may be responsible for paying part or all of the premium should the property become destroyed or damaged and unfit for occupation or use.  You should arrange your own contents insurance.  You may need to pay Stamp Duty Land Transaction Tax and if the lease is longer than 7 years it will need to be registered with the Land Registry which will incur a fee.

You must be fully aware of and able to comply with your responsibilities and obligations under the lease, including restrictions on use of the property and/or repair obligations.  In the case of a new unit, ensure the landlord accepts liability for inherent defects in the construction or design of the building that were not obvious on inspection.  Your solicitor can negotiate the terms of the lease with the landlord to exclude liability for inherent defects. He or she can also clarify yours and your landlords’ rights regarding renewal terms of the lease.

(Published 04/06/2018)

Hannah Fynn

Hannah Fynn

Solicitor

Part of our Commercial and Residential Property team in Oswestry

Sarah Tidswell

Sarah Tidswell

Trainee Solicitor

Part of our Property team in Wrexham