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Helpful advice for first-time commercial tenants

PUBLISHED: 12:51 26 June 2019

Tenants may be able to negotiate a rent-free period to carry out any alterations to the premises, but only if it's agreed before the Heads of Terms are signed   Picture: Getty Images/iStockphoto

Tenants may be able to negotiate a rent-free period to carry out any alterations to the premises, but only if it's agreed before the Heads of Terms are signed Picture: Getty Images/iStockphoto

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Juliet Farrington-Breeze, a trainee solicitor at Cozens-Hardy, offers advice to tenants who are considering renting their first commercial premises.

Juliet Farrington-Breeze, trainee solicitor at Cozens-Hardy   Picture contributedJuliet Farrington-Breeze, trainee solicitor at Cozens-Hardy Picture contributed

As a new commercial tenant the letting process can seem like a minefield. Initially, tenants need to find the right premises to suit their business needs without paying over the odds. If tenants are looking for new premises there are many avenues where they can begin their search, such as online or through a commercial agent.

Once premises have been located, the terms under which the tenant will rent the premises may be agreed directly between the parties or through the landlord's agent. If an agent is involved, they will draft the 'Heads of Terms' for the parties' approval. This document may seem daunting, but it simply sets out the agreements that have been made and which will be incorporated within the lease.

Although the Heads of Terms are not legally binding, they can be difficult to alter once they have been approved. Tenants should therefore be proactive and seek legal advice at this early stage to ensure that they are aware of the consequences of the terms (and if necessary, negotiate them further).

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Do not hesitate to get in touch with us about this, as we'd be really happy to have an obligation-free phone call to help put your mind at ease.

Tenants should consider how long they want to stay (and pay) for the premises in light of their business needs. If tenants are starting a new business, they should consider whether a shorter lease would be preferable or whether flexibility can be negotiated by the inclusion of a break clause and/or having the ability to assign (transfer) or sub-let the lease to someone else.

The benefit of a break clause is that the tenant can terminate the lease before the end of the term, should there be a need. This is usually only on a specific date and subject to certain conditions. On the other hand, assignments and sub-lettings can occur at any time, however, be aware that the landlord may insist on the tenant fulfilling certain obligations, such as providing guarantees, before they will provide their consent.

Before tenants move into the premises, alterations may be needed in order for it to be suitable for the intended use. If alterations are needed, this should be raised at the outset to ensure that such alternations are possible and to gain the landlord's consent. Tenants may be able to negotiate a rent-free period to carry out the alterations without being burdened by paying rent simultaneously. This is just the type of matter that we can help with, but only if we are involved before the Heads of Terms are agreed.

In next month's article I will be offering further advice to tenants, including outlining the costs that they are likely to be responsible for.

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