Negotiating or renegotiating your commercial lease does not have to be a huge headache. Here
are five tips to take the ‘ache’ out of lease negotiations: -
the old rules. So much has changed
in the commercial property market in the last two years, that old rules like
‘the tenant pays all the landlord’s fees and costs’ are being broken more often
than they are being observed. Start with
a fresh slate and look for opportunities to save costs.
2.Do your homework. Investigate the market rents
for the area. This information is easily
available online. For commercial
landlords, you need this information to set your expectations realistically,
particularly if you have not let the property in the last year or two. For commercial tenants, you need this
information to know whether the rent demand is realistic. For both parties, having comparable data will
allow you to negotiate from a position of strength.
3.Have a strategy going into the negotiation. Know what you
want with respect of the key terms and conditions of the lease (rent, term,
rent reviews, break clauses, guarantee agreements). Going into a negotiation without a strategy
guarantees that you will come out worse off than a more prepared party!
4. Be prepared to compromise. The
landlord-tenant relationship is a long-term relationship. Getting off on the wrong foot by being overly
aggressive in the initial negotiations may sour the relationship before it has
even begun. Know what the key issues are
for you in the lease negotiation and be prepared to compromise on issues that
aren’t so important to you. Remember,
this is the beginning of a relationship that will last years. Don’t get off on the wrong foot!
5. Keep an eye on the longer term. Commercial
property pundits are predicting that rents will start to rise again in late
2012 or early 2013. For commercial
landlords, this means that longer leases (more than 5 years) agreed at today’s
reduced rents could be a losing proposition in just a year or two. To avoid being stuck in a ‘losing lease,’
commercial landlords should consider options such as a reduced initial rent, a
rent review after two to three years, or a break clause after a few years to
avoid being stuck with an underpaying tenant over the longer term. For commercial tenants, this is a great
opportunity to lock in a low rent for several years and cut down one of the
biggest business overheads.
Negotiating your lease does not have to be a
headache, and can result in significant savings for tenants and a secure income
stream for landlords if done right. The
most important thing is to be prepared.
At Redbird Conveyancing Limited, we offer a free, one-hour consultation
to help strategize and prepare for lease negotiations. Give Pam O’Brien a call on 01706 281 016 and let the ‘birds’ at
Redbird help you sort it out!