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You will have read that in some parts of the country shops are closing down and high streets are becoming empty. This is not the case in every area. In fact, there are national surveyors tasked with sourcing premises in Newcastle on behalf of national brands. Some streets in the city centre command rents second only to those in London.
One reason that some businesses are failing is that the terms of their leases are too stringent. The rent may be too high; the responsibility to repair the landlord’s building may be too onerous.
Most businesses do not own the premises from which they operate, and it is more common than not that traders are leasing the premises for an initial premium with rent being paid thereafter. Leases can take many forms, differing greatly in term and premiums. The terms of the lease will be negotiated by all parties prior to the commencement date. It is down to the parties to negotiate the terms of the lease, and this could be a vital process for the longevity of the business.
That’s where a Commercial Property Lawyer comes in very handy. When negotiating a lease, it is essential to have help from a Property Solicitor at the start of the process. The idea is to involve your solicitor BEFORE you agree what are known as Heads of Terms. If you try to negotiate yourself, it is then harder for your solicitor to help you renegotiate more favourable terms when they do become involved.
Imagine you are all excited, you are going to set up your first business; you have seen a property that you would love to rent. You contact the estate agent dealing with the property and agree to a ten-year lease, payment of upfront rent, and you agree to pay for all future repairs to the property. However, did you stop to ask how long the property has been empty? If it has been vacant for months, the landlord may be prepared to give you a rent-free period so that you can decorate. They may be prepared to take rent monthly instead of quarterly upfront. They may even accept that they will be responsible for all repairs and not you. Do you really want to pay thousands of pounds to repair their roof?
Getting these key points right at the start could be the difference between you making a profit from your business or not.
If you are a landlord, do you want your tenant to be able to run any type of business on your premises? After all, a pub or restaurant will have greater footfall than say an accountants or solicitors office. Is the tenant able to pay the rent in the long term or are you going to be left out of pocket? Do you want your tenant to be able to leave and sublet to someone who is unsuitable?
During the process of negotiating the Heads of Terms, it is important that you are fully aware of the implications that some of these factors may have on your business. A longer-term lease may secure premises with fixed costs for long enough that you are able to manage cash flow for the immediate future, but what are your options should the financial circumstances of the business change? Is there a break clause within the lease that would allow you to find alternative premises that may prove more suitable for the needs of the business?
Many of the more well-known high street chains to face difficult financial times in the past year (such as Toys R Us and Mothercare) have been situated in very large industrial style units. Premises such as these in the past have offered the once thriving retailers great benefits including the ability to store large amounts of stock while offering a “try before you buy” style of product display. Unfortunately, these units also carry greater overheads and often staffing costs. When these businesses started to decline in part due to increased online competition, their premises became a large expense that was providing an outdated and largely unwanted sales experience. If a smaller business found itself in this position, the solution would seem simple, downsize. The flexibility of a company to be able to re-assess the lease which it is party to could be the difference between surviving on the high street and being forced to close the doors altogether. Companies can fail because the leases they are subject to are just no longer acceptable for the business they are trying to run.
The job of your Commercial Property Lawyer is to point out all of the future pitfalls that you may face if you sign an unsuitable lease. It is imperative that all parties are happy with the final version before signing the lease. Once the lease is signed and potentially registered at the Land Registry, it cannot be changed without further work being involved at an additional expense. Sometimes it cannot be changed at all.
At Emmersons Solicitors, we help our clients to negotiate leases that are suitable for their long-term needs. We ensure that our clients have been advised fully. This means our clients are in no doubt as to their long-term obligations whether they are landlords or tenants.
We take pride in providing our clients with high levels of service and advice to ensure that they have all the information they need before entering into a lease. Emmersons Commercial Property Solicitors are here to protect your business needs and the future of your company. We are keen to support you to ensure that you are in the best possible position should your company hit changing tides.
For further help and advice, please do not hesitate to contact me,
Property and Conveyancing Solicitors Newcastle: 0191 284 6989
Property and Conveyancing Solicitors Sunderland: 0191 567 6667
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