If your business is expanding, you may well need additional
space.
Leasing can be more attractive than buying. You need less capital
outlay up-front, and terms can be flexible.
The main points to consider are:
- Which entity should take the lease? – the lease will become a liability for that entity. Be aware the landlord may request a rent deposit or guarantee if it has doubts on covenant.
- How much space do you need? How long for? Do you need the ability to end the lease early, e.g. halfway through? – if not, then a longer rent free or lower rent may be on offer.
- The premises may become surplus to your requirements unexpectedly – so try to ensure your ability to assign (sell) the lease or sub-let isn't too restricted.
- Traditional "open market" rent reviews can produce shock increases in boom times – so consider asking for any rent increases to be linked to e.g. RPI (or the lower of "open market" and index-linked).
- If the premises are part of a multi-occupancy building or industrial estate, Service Charges (a share of the cost of common services) may be payable. Request previous Service Charge accounts, and consider asking for a cap (either just for the first year or two, or only increasing in line with e.g. RPI) – so your outlays are more fixed. Check the level of rates too (the tenant usually has to pay these).
- Have a lawyer check the title deeds for any important title conditions – e.g. use restrictions.
- A lease usually makes a tenant responsible for repairs – so consider a Schedule of Condition recording the state of repair at lease start, plus an obligation only to hand the premises back in that state when the lease ends.
- If your needs are short-term, consider flexible-leasing options, e.g. serviced office accommodation – often more expensive, but better if you only need space for a few weeks.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.