Process of securing a commercial lease

[Yasmine]

Hello,

I am in the process of trying to secure a lease on a commercial property and am looking for some insight and experience as this is totally new to me.

I have received heads of terms from the agent/ lessor and this has been sent to my solicitor too (though they've been a bit quiet).

As I mentioned this is all new to be and my question is basically what am I supposed to do next!

I can see points in the heads of terms that I will want amended, and some I'd like added. Do I do this myself or is this a job for the solicitor?

Do I need a commercial surveyor? I have just been quoted £3,300 for this which was a lot more than I was expecting.

I suppose I'm looking for a step by step process of what's involved in securing a commercial lease but for all my internet trawling so far I've not found this!

I don't have a huge amount of money to throw at this set up but am prepared to pay what I need to to get it done properly. Advice and experience extremely welcome.

Y

 

[fisicx]

Do I need a commercial surveyor?

YES!

If your solicitor is being tardy get a different solicitor. They are the once who should be advising you.

I've just googled and there are loads of websites detailing the process. This is just one of them:

The 8 key steps in a commercial lease process all businesses should know

Navigating the commercial lease process made easy. Learn the key steps and considerations for a successful lease agreement.

www.cripps.co.uk

 

[AlanJ1]

Basic rule is if you don't pay now you will end up paying a lot later.

 

[Yasmine]

Thank you both. Totally agree, better to pay now than later and I'm fine to pay what is necessary, however when you haven't done it before you don't know what "necessary" is! Or what a reasonable quote is. Thanks for the link I will look through it now.

 

[Mark T Jones]

Is your solicitor a specialist in commercial leases?

If not, or if they are unresponsive, get one who is

Use one of the guides revered to, it will help you to ask more 'evolved' questions

Common / recurring themes on here are

Repairing clauses
Rent reviews
Dilapidations
PGs
Break clauses
Utilities

I'm sure there are many others

 

[Yasmine]

Thanks, yes they do specialise in commercial leases.

I am aware my questions might sound niaive but that is the stage I am at, and I am a strong believer that asking questions can be the most effective way to learn. It is great to have a forum like this to learn from eachother and I hope one day I can be a help in answering other peoples questions!

Having just read through the article linked above it sounds like the heads of terms should be agreed before the solicitor is appointed.

So therefore would it be up to me to agree this? Also there is no mention of using a surveyor in this article but I understand that would be recommended?

Thanks, Y

 

[fisicx]

Have a look at some other guides, they say different things.

This one says to get a survey done:

13 steps before taking out a commercial lease | Insight Law

When you decide to take out a commercial lease it is important to choose the lease that best suits your business and to negotiate terms which will enable your business to thrive. Your decisions have the potential to make or break your business. Lease agreements are normally drafted in the...

www.insight-law.co.uk

 

[Mark T Jones]

Thanks, yes they do specialise in commercial leases.

I am aware my questions might sound niaive but that is the stage I am at, and I am a strong believer that asking questions can be the most effective way to learn. It is great to have a forum like this to learn from eachother and I hope one day I can be a help in answering other peoples questions!

Having just read through the article linked above it sounds like the heads of terms should be agreed before the solicitor is appointed.

So therefore would it be up to me to agree this? Also there is no mention of using a surveyor in this article but I understand that would be recommended?

Thanks, Y

How can you agree to heads of tetms if you don't fully understand the nature of the contract?

The timing of appointing a solicitor is your choice

It is good to come here to learn, but it's important that you have a single, trusted source of specific advice.

 

[eteb3]

In non-contentious relationships between parties who both know their onions, my understanding is heads of terms are usually agreed to without a solicitor, then taken to a solicitor to draft up legally. But if you don’t know what you’re doing (and since we do know commercial leases can be *extremely* onerous) personally I would want a solicitor on it before that - hopefully one with knowledge of the local market, but maybe your surveyor can do that value-add for you.

From a pure negotiating perspective, once you’ve agreed to heads of terms if your solicitor turns round and says, “that’s mad, they’re going to eat you for breakfast”, it’s hard to reopen what’s agreed in principle already

 

[WaveJumper]

Well all of the above an added to Marks list look out for service charge. What type of unit are you looking to lease, does it need work (this is obviously where you need a surveyor) have you got fit out costs, have you actually negotiated the rent etc or just excepting their figure

 

[Chris Ashdown]

One thing to look out for is that most landlords these days will want a personal guarantee to go with the lease, so even if your company goes bust you will personally be held responsible for the remainder of the lease payments and dilapidations etc
Landlords will also take out building insurance every year and invoice you for the cost plus vat, this is so they know their building is ensured at all times

 

[Paul Kelly ICHYB]

I can see points in the heads of terms that I will want amended,

Agree the basics on the HoT before passing anything on to legal - everytime you change something and a solicitor picks it up, you are charged!

 

[WaveJumper]

Hopefully the OP updates us on their progress with this new adventure would be a great thread to point others too who go on a similar journey

 

[RandyMarsh]

I would absolutely recommend getting a surveyor. I paid about £1000 for a survey on a property and they identified about £4000 of work that needed doing. I used this to negotiate a rent free period worth £7000. Another business nearby didn't use a surveyor and when they had signed the lease and started fitting out the property, the kitchen floor collapsed into the cellar! They were liable for the cost of repairs and it caused a long delay in opening the business.

As with any contract, you need to be sure what you have to pay, what you are allowed and forbidden to do, and how you can cancel. Hidden charges on top of the rent may include building insurance, VAT, building maintenance costs, service charges etc as well as the costs you are usually directly liable for (business rates, refuse, utilities etc). Make sure you understand how the rent may increase over the period of the lease, how you can end the lease early, and what happens if your business fails.

It's a good idea to explicitly state to the landlord what activities you will be doing at the property and what changes you will be making to the building and make sure these are agreed before you commit.
Ensure that (for example) you can get a delivery truck up to your door, that you can store your bins in an allotted area, that your working hours and any noise/smell from your business activities are acceptable to the landlord and the neighbours. If you need any planning permission or licences to carry out your business you will need a plan in the event that these are denied.