Slake the Ache: Tips for Negotiating Your Commercial Lease

By: Redbird Conveyancing Limited  11/04/2011
Keywords: property conveyancing

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: -

1.Forget 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!

Keywords: property conveyancing

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