Understanding Commercial Office Leases
Make sure you are familiar with the common clauses of an office lease and how they may affect your tenancy:
Rental & Deposit
The lease will provide full details of your expected costs involved in renting the property. In addition to the monthly rent and deposit, the lease will also state which party is responsible service charges, utilities, repairs and fitting out/alterations costs.
Top tip: It may be helpful to make a list of all the expected costs usually associated with an office lease, and ask the landlord to be explicit about who pays for what so that you fully understand all the costs associated with an office lease.
The lease will set out the basis by which the rent can be reviewed. For example, whether the rent is likely to increase at review, or whether it is fixed to an index. The rules by which the rent can be changed and reviewed should be clear within the lease so there are no unexpected surprises during your tenancy.
Top tip: You should try to negotiate a break option exercisable only by the tenant. That way, you have a ‘get out’ should your financial or operational situation changes dramatically.
The lease will clearly state the length of tenancy. An average lease length is between 3-5 years. Signing up for anything longer than 5 years may prevent organic business growth and tie you into a contract for too long when you may be unable to predict what your business will be like in 5 years.
Top tip: When considering how long you want to lease the property for, make sure you factor in any expected business growth which will influence how much space you will need in 3-5 years time. If you underestimate your business growth it can restrict your business’ organic growth.
A subletting clause allows you to sub lease the property, in whole or part, to another tenant. This can be a flexible clause for most tenants, who may opt to sublet the property for operational or financial reasons.
Top tip: If you are considering subletting find out on what basis the sublease can be granted and whether you will be limited to the rent you can charge the sub tenant.
Make sure you ask a commercial property solicitor to review your office lease before you sign it to ensure your interests, as a tenant, are protected. It’s also important that you are fully clear of your legal and financial obligations as a tenant before you commit to anything.
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