Top 5 Clauses to Check in a Commercial Lease
Securing commercial premises is a milestone for any business, but the fine print can hold significant risks. Learn which clauses require your absolute attention before signing.
The risks of skimming a commercial lease are substantial. Unlike residential tenancies, commercial leases offer far fewer statutory protections. You are expected to have negotiated the terms, meaning a single overlooked sentence can lead to spiraling costs or an inability to move your business when you need to.
The Rent Review Clause
Understand when and how rent increases. Most commercial leases in the UK include an "upward-only" rent review every three to five years. This means your rent will never go down, regardless of the market. Ensure you know if the review is based on Open Market Value, RPI (Retail Price Index), or a fixed percentage increase.
Break Clauses
Your exit strategy. A break clause allows you to terminate the lease early on specified dates. However, they are often conditional. If the clause requires "vacant possession" or all "covenants to be performed," even a small repair issue could invalidate your right to leave. We ensure these conditions are simplified to protect your flexibility.
Repair and Dilapidations
Who pays for fixing the roof? A "Full Repairing and Insuring" (FRI) lease means the tenant is responsible for all repairs. Without a Schedule of Condition attached to the lease, you may be forced to return the building in a better state than you found it. This can lead to massive dilapidation claims at the end of the term.
Subletting and Assignment
Flexibility if you need to move. If your business grows or pivots, you may need to move before your lease ends. An assignment clause allows you to sell the lease to someone else, while subletting lets you rent out a portion of the space. Check for "Alienation" clauses that might be too restrictive.
User Clauses
Ensuring your use of the property is permitted. This clause defines what activities you can conduct on the premises. If it is drafted too narrowly, you might find yourself unable to expand your services or change your business model without the landlord's consent, which may be withheld or come at a cost.
Protect Your Business Interests
Don't sign a lease you haven't fully understood. At Cadence Contracts, we specialize in identifying hidden liabilities in commercial agreements.
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