For any new business, renting an office space for the first time is a huge step. But while that huge step is undoubtedly worth celebrating, it’s also something that should be approached with caution.
What many eager entrepreneurs don’t realise is that a deceiving or poorly constructed commercial lease has the potential to severely damage or even see the complete ruination of their business. From unfair charges to hidden and often disastrous liability clauses, it’s crucial to examine any commercial lease with a fine tooth comb. More than that, it’s essential to get professional help from an experienced property lawyer in doing so.
Like anything in business, the more you understand the less exposed to risk you are. With that in mind and to get you started, here are five of the most important red flags to watch out for in a commercial lease.
1. Anything you don’t fully understand
At first, looking for an office space to lease may not seem so different to renting a house or flat. It can certainly feel as exciting as you scope out the new home for your business and start to get a feel for its future. But at the same time, it’s crucial to remember that a commercial lease is significantly more complex than a residential one, and comes with far greater risks.
If negotiated poorly, the terms of your lease could end up feeling like a constant drain on your resources at best, and a serious threat to your business at worst. For this reason, it’s crucial to understand every single aspect of the agreement, using the help of a property lawyer to do so. If there are any terms, jargon or provisos that you don’t 100% understand or that seem deliberately vague, make it your mission to rectify this before you even consider signing anything. Chances are your landlord is trying to pull the wool over your eyes, and hoping that you just don’t notice.
2. Maintenance and repair traps
Most commercial leases are fully repairing and insuring (or FRI) leases, which means that you, the tenant will be responsible for paying for both the repairs of the property and its insurance. This may seem straightforward enough, but it’s important that you fully assess the details of this part of your agreement. This is because what exactly is meant by ‘repair’ can be up for negotiation, with repair clauses being one of the most commonly litigated aspects of commercial leases.
Understanding the ins and outs of what you’re responsible for is key, as landlords have a tendency to try to put as much honus on their tenant as possible. This could result in you finding yourself in a tricky spot if you find out later down the line that you’re responsible for costs you hadn’t budgeted for due to vague wording in your agreement.
It’s also important to make sure that, if you’re renting a space with communal areas or an office that’s part of a larger complex, you’re not held responsible for repairs and maintenance of the spaces your business doesn’t actually use. It’s a nasty trick but some landlords will try it on – and they’ll rely on you having not fully understood your agreement to get away with it.
3. Rent reviews that are overly frequent
Rent reviews are commonplace when it comes to commercial property leases, especially for longer term agreements.
They mean that the landlord has the legal right to raise your rent at predefined intervals, and they could even mean you’re able to negotiate lower rents if the market prices drop (although this is rarer). But while rent reviews are a natural part of leasing an office, some landlords may try to sneak them in far too frequently, which you’ll be able to spot if you assess your agreement closely.
Ask a property lawyer to review your contract and they’ll soon tell you if there is an unfair amount of reviews included, which could end up saving you a lot of money in the long run. Better yet, it may save you from entering into a lease with an unethical landlord altogether.
4. Ridiculously long-term leases
Securing a long-term lease may at first feel like it offers you the security you crave for your business. But it’s crucial to give yourself the freedom to grow, and the flexibility to move if something about your office space doesn’t end up working out.
Landlords that try to pressure you into very long-term leases are only doing so with one goal in mind – to legally bind you to the property for the foreseeable future so you have no choice but to stay put and pay the rent even if you find yourself desperately wanting to move. It’s also worth asking yourself why they’re pushing to tie you into such a long-term contract – is it because they’ve struggled to let the office in the past, and if so, why?
Looking for an office space to rent is an exciting and rewarding process, but with so much at stake it’s vital to stay cautious. After all, it only takes one small oversight to lead to a very big problem later on – and no one wants that for their business.
Finally, don’t forget that if it does all feel too overwhelming at this stage, there’s nothing wrong in admitting you’re not quite ready to take the leap into renting your own commercial office just yet. Going for serviced offices instead can be a great temporary solution, and will mean you can give your business that bit longer to grow. Plus – and perhaps most importantly – it’ll ensure that you don’t rush into anything you’re not 100% ready for.