How to negotiate a commercial lease with your landlord

The commercial bargaining power of landlords and tenants often changes in line with market forces , so you’ll need to be up to date with your obligations and rights (especially when it comes to taking or renewing a lease).

In his latest article, Commercial Property Solicitor Richard Ramshaw outlines some tips, strategies and a checklist for negotiating the Heads of Terms of a commercial lease.

Who is responsible for repairs in a commercial property?

For a long time, commercial tenants have accepted the idea of full repairing and insuring ("FRI") leases. These types of leases transfer almost all liability to the tenant to repair – and even rebuild – the premises.

This may have made sense when it was normal to take on a lease for 25-30 years, but short-term leases of 5 years or less are becoming increasingly common and FRI leases don’t make so much sense here.

As a tenant, you should be cautious about taking on a FRI lease which could potential make you liable for completely overhauling a building.
If there are any concerns about the condition of the property, a photographic schedule of condition should be included to the Lease.

How much service charge is payable?

Where there is a service charge payable regarding common facilities enjoyed by the property, you should consider whether your liability should be subject to a financial cap.

Should you really be required to contribute to the cost of items (e.g. the resurfacing of a shared access road) that will outlive your occupation of the property?

Related: Who is responsible for repairs and maintenance in a commercial lease?

What happens to alterations at the end of a commercial lease?

It's commonly accepted that any alterations made to a property by the tenant should be removed when the lease expires, and the premises should be returned to how it was prior to alterations being made.

But should a tenant have to rip out and discard its fit-out, only for a new incoming tenant to reinstall a brand new set of fitting-out works?

On this point, you should ask your landlord to adopt a more collaborative and environmentally responsible approach, which would only require alterations to be removed when needed to secure a new letting.

How to negotiate a commercial lease

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