Securing the right commercial lease can make or break your business, so it’s incredibly important you understand the key terms which you may come across during the agreement process. Likewise, if you’re a landlord you want to make sure you’re getting the best deal for leasing your property.

Alongside this, having an idea of your negotiation strategies before throwing yourself into any contracts is pivotal in ensuring you get the best deal. This might seem overwhelming, but don't worry. At Field & Sons we live and breathe commercial lettings, so we’ve got you covered. 

Key Terms In Lease Agreements

Lease Terms

This refers to the length of the lease agreement, and can vary depending on both parties' needs. Typical agreements can range anywhere from 1 year, and can sometimes go up to 25 years or more. 

Alterations

These are rules about what changes the tenant can make to the property. This is particularly important in commercial leases, as you will often want to personalise your space to suit your business needs.

Rent

This refers to the payment the tenant will make to the landlord in exchange for the usage of their property. This is typically done quarterly or monthly but can sometimes be negotiated depending on your requirements. 

Percentage Lease

Usually in addition to rent, percentage lease is an agreement that allows the landlord to take a percentage of your takings each month. Not all commercial leases have this, so if you’re a tenant it’s worth checking out any potential agreements as this may not be something your business can afford. 

Automatic Renewal

Some lease agreements will renew automatically at the end of the contract period. This can be great if you want a hands-off approach to leasing, and it can be a time saver. However it’s important for either party to consider agreeing a new contract if you want to discuss any new terms, as automatic renewals will often be on the same terms.

Schedule of condition

Schedule of condition (sometimes seen as SoC), is a record of the existing condition of the property at the start of a lease. It will consist of photos and descriptions regarding the condition of various areas & items within the building. 

Alienation

Alienation is a clause in the contract that gives the tenant the right to sublet, share possession of, or reassign a leased property. This is important as it gives flexibility to the occupier in the situation that their business needs to close or relocate. 

Break Clause

A break clause allows tenants to exit the lease agreement early. Typically in a contract, you will see the conditions that will need to be met in order to exercise this break clause. Alike to alienation, this is an important clause for the tenant to have in the contract as it gives flexibility if their business is failing or if they need to move locations.

Negotiation Tips

Research Market Rates

Whether you’re a tenant or a landlord, understanding current market rates will allow you to make better and more informed decisions. For example, it will allow you to see if the proposed rent is reasonable. Having this knowledge also gives you better negotiation power, as you will know if there is likely to be room for any movement on the price. As a tenant, you may also be able to identify trends such as rising or falling rates, which could help you to lock into a contract at a lower price. 

Assess Your Business Needs

Potential tenants should consider the needs of the business when negotiating. This can include: 

• Checking if you need specific fixtures and fittings which the landlord may need to be made aware of. 

• Seeing if it's more beneficial to have a flexible short term lease or a long term lease.

• Ensuring the location offers enough space for your projected growth.

• Seeing If the location is convenient for staff and customers, and if it includes features they need such as parking.

• Checking if the lease accommodates your opening hours and if all other operational needs are met.

Following the above points will help with your cost management, efficiency and longer term successes. 

Consult Professionals

If you’re ever in doubt, sometimes one of the best negotiation tips can be to consult professionals. At Field & Sons, we have over 30 years’ of experience in the south and central London commercial property market. We know the market inside and out, and we’re just a phone call away if you need some expert advice. 

Thoroughly Read Your Contract

Ensure all paperwork is read thoroughly, including your rights and responsibilities. This can include details into how you may be able to break the contract if needed. 

Understanding commercial lease agreements is crucial for both tenants and landlords. By familiarising yourself with key terms and having a clear negotiation strategy, you can secure a lease that aligns with your goals. Field & Sons have a lot of expertise in the commercial property market to help guide you through the process, ensuring that you get the best possible deal.