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| Negotiating a rental deal |
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Sponsored By: King Sturge |
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Once you have settled on a suitable property, the hard work
begins!
Engaging the services of a surveyor at this stage to negotiate on your behalf
can have significant benefits. They are usually well versed in the
technicalities and have the negotiation skills to get you the desired outcome.
Once suitably briefed, acting as an intermediary, they keep you one step
removed from the coalface of negotiations, reverting only to keep you updated
and to take your instructions where needed. This leaves you free to deal with
other major decisions.
The process of negotiation is to reach an in-principle agreement with the
landlord, or their agents, taking the deal to what is called Heads of Terms
stage, before instructing solicitors to document by way of a lease or a
licence. The agreed Heads of Terms form the framework around which your
solicitors and the landlord's solicitors will seek to document your occupation.
The basic principle is that these should be as detailed as is necessary, to
minimise the time, complexity and often therefore cost of the subsequent legal
negotiations.
Pan industry guidance has been published in the form of the Code for Leasing
Business Premises [http://www.leasingbusinesspremises.co.uk/], which seeks to
highlight the major issues requiring agreement at this initial stage. Landlords
are encouraged to recognise the needs of tenants and be flexible in their
approach to negotiations. They will however be firm in wishing to ensure that
their investment is going to be protected and used appropriately, that rent
will be paid promptly, kept in good condition and handed back suitably at the
expiry of the lease.
At high-level, the parties should agree:
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The definition of the premises to be demised, usually delineated on a plan.
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The length of term (and any rights for lease break).
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Whether or not it is intended that the tenant has the benefit of security of
tenure (an automatic right to renewal of the lease at expiry).
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The initial rent and appropriate provisions for the rent to be reviewed (by
reference to the open market values or perhaps by indexation).
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The right of the tenant to sublet or assign the lease (in the event that the
premises are no longer required).
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Who is responsible for repairs, both internal and external, and outgoings such
as insurance and business rates?
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If part of a bigger property, for which the landlord remains responsible for
servicing, repair and maintenance, then the provisions for an appropriate share
of the service charge and outgoings.
Within each of these high level heading, there are many legal technicalities
which can have significant implications on the tenant. The Code for Leasing
Business Premises offers more detailed guidance, as well as providing specimen
Heads of Terms, but each situation is different, the balance of power in
negotiations between landlord and tenant can vary, and each solicitor tends to
have their own approach to drafting of individual lease clauses. There is no
substitute for tailored advice.
All this gives rise to complications, just when you most desire a
straightforward solution. Your advisers will navigate you through this, but it
is your job to keep them focused on your objectives, and set them priorities.
Let them know your "must-haves" - and those matters you can concede. Be
realistic, and recognise the landlord's objectives, but be determined and be
prepared to walk away. Plan for contingencies in case of this eventuality -
what is your fall-back? Just as with a house purchase, you have no certainty
until completion of the legal formalities and you should ensure that your
business plans are all aligned, so that shopfitting or the installation of
equipment and furniture, stocking of shelves or commissioning of equipment, can
all commence as soon after completion as possible.
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For any more information or help please contact Jeremy
Day, King Sturge, Tel: 020 7493 4933
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