Negotiating the Renewal of a Commercial Lease

Negotiating the renewal of a commercial lease is often a lengthy and complex process. It is important to begin the negotiation early and take a strategic approach. Do you need legal advice or assistance with a commercial property lease? Contact our commercial property solicitors in Levenshulme, Manchester today.

A good broker can be an invaluable asset in this process, assisting you with competitive negotiations. They will also be aware of current market conditions and help you explore your options.

RENT AND/OR SERVICE CHARGE REDUCTION

Negotiating the renewal of a commercial lease is a lot like shopping for a new car — it's all about the deal. The key is to find a deal that will be beneficial to you and your business, while also meeting your budgetary requirements.

One of the easiest ways to save money on rent is to ask for a rental reduction. This is especially true if you're paying high base rent.

You might also be able to negotiate a lower service charge. These charges are usually set out in a schedule, and can cover the costs of maintaining the building, lighting, cleaning and shared areas.

Some old-school landlords still allow a fixed service charge to be charged, but most are variable. This is because the costs of running the building, lighting and cleaning might change from year to year.

In addition, a service charge may be used to recover any costs the landlord has to pay in advance to make major improvements to the property. For example, if the landlord has to borrow money to pay for new flooring or painting, they can recover those costs through the service charge.

To get the most out of your commercial lease, it's important to understand the basics – such as the legal and financial risks. By doing so, you'll be able to spot any glaring missteps and avoid making the same mistakes twice.

BREAK CLAUSE

When renewing a commercial lease a landlord or tenant may wish to introduce a break clause which enables the parties to end their lease early on certain dates or in certain circumstances. This can be particularly helpful when the business of either party has changed in any way, such as if a change in the ownership of the business or the sale of the premises is contemplated.

There are a number of issues that need to be addressed when negotiating a break clause, including the precise date or point in time on which it will be validly exercised and any pre-conditions which must be met by the tenant before they can be used. These have become a source of litigation in recent years as landlords seek to use the tenant's failure to comply with such conditions as a reason to prevent them from exercising the break option.

For example, there are pre-conditions that require the tenant to have paid all of the rent or other payments due under the lease by a certain date. This can be problematic where the break date does not fall on a quarter date, as the whole of the quarterly rent is payable in advance.

A break clause can also be subject to other conditions, such as the tenant must have complied with any covenants in the lease or pay any outstanding service charges and insurance premiums. These pre-conditions can be very onerous on a tenant, who often does not have the resources to comply with them. United Solicitors offer commercial property solicitors in Levenshulme, Manchester today.

DURATION

There are many factors that affect the duration of a commercial lease. It depends on the type of business you are running, the amount of space needed and the landlords recoupment expectations of their investment. Typically the average length of a commercial lease is 3-5 years, but that can vary depending on market conditions and your credit rating. If you are asking the landlord to pay for a lot of tenant improvements you will likely be asked to sign a longer term lease than this, possibly 10+ years. Regardless of your circumstances the best course of action is to consult with an experienced commercial real estate broker who can help you negotiate the right lease length and terms for your needs. For best commercial property solicitors in Levenshulme, Manchester contact United Solicitors.