A lease of property can be a valuable asset for a fast-growth business but as an entrepreneur, you need to do your homework before signing a lease. Taking the time to research what type of workspace best meets your property requirements and to agree the most appropriate terms for the letting will ensure that the lease best meets your needs now and in the future.
So, whether your business is seeking space for the first time or is expanding or downsizing, here are five factors to consider before agreeing your lease.
1. Ensure your lease is flexible
Flexibility is one of the most important considerations for a fast-growth company when agreeing a lease. Ensure the lease is granted for the right period of time and that you anticipate how long you will need the workplace for from the outset. Depending on the success of your business, you may also need to safeguard against the property becoming either too small or too big to meet your needs.
This can be achieved through negotiating appropriate ‘alienation’ provisions, which enable you to transfer the lease (assign), sub-let the lease or share occupation of the property with another business.
Subletting or sharing your space can potentially provide your business with a new revenue stream, so take the time to choose your property and consider how you could use it to your advantage as your business grows or if your circumstances change.
It is also possible to include break rights in the lease, which give you the option to end the lease at appropriate intervals.
2. Use an agent
Don’t underestimate the value of an agent, even if you are only planning to rent a small space. An agent’s local market knowledge can ensure you pay the right level of rent for the property. They can also advise on possible incentives such as rent-free periods and what security (i.e. rent deposit) you should expect to have to provide the landlord of your preferred property.
3. Plan your fit-out from the outset
If you want to fit-out your new space, put a plan in place at the earliest opportunity as you will most likely need the landlord’s consent.
Get your designs completed in the early stages of agreeing your lease, so that they can be approved in good time and at the same time as the lease, enabling your fit-out company to begin work as soon as you take occupation.
Also check whether you will need landlord consent for further alterations to the property in the future as the lease could be restrictive in this respect.
4. Check your repair and reinstatement obligations
All tenants will have repair and reinstatement obligations as part of their lease, but it is important to clarify what you are signing up to and what you will be required to do at the end of the term of the lease.
In some cases, and particularly if you are leasing a space which is in a good state of repair from the outset, you will have to put the property back in the same condition you took it in, including removing any items or alterations. You will also be required to keep the property in a state of good condition and repair throughout your tenancy.
If you’re leasing an older property or depending on the condition of the property, you should get advice on potentially limiting or modifying your repairing obligations. A common way to limit your repairing obligations is by reference to a photographic ‘schedule of condition’ which provides evidence of the condition of the property at the time you took the lease. This is then used to determine the extent of the repair works you must carry out during and at the end of the term.
The cost of, and liability for, repairs throughout the lease and at the end of the lease (dilapidations) can be expensive so steps should be taken to mitigate these costs.
5. Get your timings right
Allow enough time to agree your lease, especially if you are an international business seeking to set up a new UK base.
The due diligence process and documentation involved in the UK property market can take time, so ideally allow at least six to eight weeks to negotiate terms of the lease and get the necessary paperwork signed.
Also bear in mind that if third parties need to be involved such as banks or superior landlords, the process can take longer.