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An Easy Guide to Commercial Lease Agreements for New Business Owners

Setting up a commercial lease agreement can be a daunting process and our easy guide is intended to help you understand the process.

Opening up a new business and becoming an entrepreneur is a dream for many. Perhaps you’ve had an idea that you believe will be successful and are now ready to move forward with your business dream by taking on some premises.

This is where your business will take on a whole new perspective – for better or for worse – and it is vital that you enter into this next phase fully informed. No matter how much confidence or how much faith you have in the product or service you have to offer, location is key and you must do your research.

Once you have decided on your ideal location, it is time to decide what type of premises you want to rent.

Do you want to take it slowly by renting space to begin with?
Renting space is a good middle ground especially if you are able to increase the amount of space as your business grows. Another positive of renting space is that these arrangements can be easy to bring to an end.

Do you wish to undertake a more formal approach?
If you wish to undertake a more formal approach, it is time to negotiate the terms of your occupation. Whatever you choose, the terms should work for you and your business.

Once the negotiations are complete the agreement reached is documented in a Heads of Terms document. It is important to ensure that these Heads of Terms fully reflect your needs as a tenant, as changing them is not an easy process.

Leases can be long documents but the important points to remember when negotiating are:

  • Check the length of the lease
  • Most leases provide for the rent to be paid quarterly. Ask if it can be paid monthly to help with cash flow
  • Check how and when the rent is reviewed
  • Can the lease be terminated at a certain point? e.g. at the end of the second year on six months’ written notice. Be careful here as if this is not done correctly there is no break and you risk being tied in for the duration of the lease.
  • Whether you are able to transfer the lease to another, grant an underlease or share occupation. Be mindful here as there may be hidden costs from your landlord.
  • Make sure that the specified user in the lease fits your business and the premises.
  • Are you responsible for internal repairs or is the landlord responsible? Always try and limit your repairing obligations by referencing to a Schedule of Photographic Condition.
  • Check the landlord’s insuring obligations.
  • Check the Forfeiture or Re-Entry provisions in the lease. How can the landlord gain possession of the premises?

The most important point is to seek legal advice and to not look at this as an added cost. Expert legal advice can save you money for when you need it the most.

For further advice on this and other Commercial Property issues contact our Commercial Property department.

Before relying on this commentary please read the Reliance on information posted section in our Terms of Website Use in our Legal section. Please note that specialist advice should be taken in relation to any specific queries and the information above is provided for general information purposes only.

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Our Experts

Jeremy Burke

Head of Department
Commercial Property

David Redgate

Commercial Property

Simon Stempien

Commercial Property

Sophie Robins

Commercial Property

Usman Miah

Associate Solicitor
Commercial Property

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