New Leases and Lease Renewals - 10 Key Questions for Occupiers
The answers to the following questions can make a significant difference to occupation cost. Most tenants of business premises will not have in-depth knowledge of real estate transactions or the leasing market, and only encounter them every five to fifteen years when looking for new space (or renewing an existing lease).
1. Cost of repairs and remedying defects – is it the Landlord or Tenant who pays?
2. Service charge – what should be included, what should be excluded?
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4. Flexibility – how free am I to assign, sublet, share possession with group companies?
5. Rent review – does the detailed wording really matter?
6. Security of tenure – what does it mean? do I need it? How will any break clauses work?
7. Uninsured damage – who bears the risk? (It is usually the Tenant unless it negotiates otherwise).
8. Power, utilities and cooling – do I need guaranteed minimum levels? Can I be sure that I can upgrade if necessary?
9. Alterations – how much freedom do I have? Will I have to pay for complete removal and stripout when the lease ends?
10. Environmental – who bears the cost of environmental compliance? (This is relevant where the building or the ground beneath it contains contaminants or other materials that may need to be removed, such as asbestos).
Tenants’ agents and surveyors, when negotiating heads of terms, will focus mainly on the level of rent and basic issues; usually they will not think to challenge the Landlord’s standard terms on other items. It can then be difficult or impossible to regain the lost ground following solicitors being instructed.
Tenants will often benefit by obtaining a degree of legal input during heads of terms discussions. For a modest amount of time spent early in the process it may be possible to markedly improve the deal from the tenant’s point of view, leading to real savings over the life of the lease.