Now that the festive delights of Christmas are over, January 2019 heralds the start of an uncertain new year for Britain, with only a couple of months to go until Brexit.
As it is currently unclear what the economic climate will look like moving forwards, now is as important a time as ever to ensure that your business is able to adapt to changing markets, and that your lease terms provide the flexibility to support this.
Your Landlord should also be keen to ensure that your business remains a success throughout the uncertain times to come, to enable them to receive rent from the property, so should be more open to negotiation. You may therefore wish to consider approaching them about:
- Alterations
Are you able to reconfigure your space with relative ease, in the event that you need to down-size or alternatively scale up your number of employees?
Would it be possible to create any self-contained areas with a view to subletting part, in order to assist with rent and outgoings?
- Alienation
Is it relatively straightforward for you to be able to assign and/or sublet, or are there onerous conditions for you to comply with?
Are you able to underlet part, grant licences or concession agreements, or share occupation with group companies?
- Break Clauses
Are you able to negotiate a rent-free period in exchange for not exercising your right to break (if your lease contains a break clause)?
Do you have any flexibility to alter the timings of any break dates or introduce additional break dates?
- Rent Reviews
Are you able to negotiate index linked reviews and “cap and collar” (upper and lower limits on the review)?
Is there any provision for you to have a fixed stepped rent as opposed to rent reviews?
- Rent
Is it possible to agree a rent reduction, in the event that the rental value has decreased?
Could you change the timings of your payments from quarterly to monthly to assist with cash flow?
- Service Charges
Is your service charge payment capped? If not, does it represent value for money?
Do the service charge provisions in your lease comply with the best practice recommendations provided in the RICS Service Charges in Commercial Property which Landlords are encouraged to follow? If your Landlord is a member of RICS, from April 2019 it will be mandatory for them to comply with the requirements provided in the RICS Service Charges in Commercial Property Professional Statement.
- Repair and Dilapidations
Are you about to take a lease of an older building? If so, have you considered limiting your repairing obligations to keeping the property in the same condition as evidenced in a schedule of condition?
Are you about to take a lease of a new building? Have you considered excluding damage caused by latent or inherent defects from your responsibilities?
If you are about to take a relatively short lease, without security of tenure, have you excluded liability for damage caused by uninsured risks?
If you are vacating a property have you considered whether your landlord is taking a reasonable stance on dilapidations in accordance with any potential future plans the Landlord may have for the property?
These points are also all worth considering if you are looking to enter into a new lease this year.
In entering negotiations, it can always be a good idea to enlist the advice of an expert to assist in the negotiations and also consider whether there are any tax implications arising from the change.
This article is not a definitive statement of the law. It is designed as a free update on the law at the time of publishing. It is not a substitute for legal advice on specific facts and circumstances. BakerLaw LLP and/or the writer accepts no liability or responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.
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