Renting business or commercial premises: the checks you should make
Working from home is a definite possibility if all you need is a small amount of space, but if this is not an option you’ll need to consider renting or leasing business premises or commercial premises.
Remember that a lease is a legally binding document, so before signing anything you must be sure you understand every single word and phrase included in it. See our article on Understanding contract property terms for some definitions, but you should seek advice from a Chartered Surveyor, a Solicitor or a Licensed Conveyancer.
There are several pitfalls to be wary of, the first one is making sure that the person you’ll be renting from is the legal owner of the property. Use this handy checklist as a guide to what you should know before you sign the lease on your business premises:
Suitability and fitness for purpose
Find out who is responsible for:
- internal and external maintenance and repair. Check if you’re responsible only for maintaining the premises in its current condition, otherwise you may be liable for damage or wear and tear that occurred before you occupied it.
- ensuring the building meets fire, and health and safety regulations
- insuring the building
- making sure the premises has the right classification of use for your business
- making sure the premises meets the access requirements of the Disability Discrimination Act
Costs and charges
Make sure you know exactly what the costs are and what they include:
- how much is the rent? You need to make sure you cash flow can cope with paying your business rent even if your income is less than you forecast
- when will the rent need to be paid? (it may be weekly, monthly or quarter) and is it paid in advance or in arrears
- how can rent be paid? cash, cheque, paypal, electronic transfer from your bank account?
- is there a deposit to pay? If so how much, and is it refunded at the end of the tenancy?
- does the rent include rates, if not how much are these?
- does the rent include any building insurance or other insurances?
- are service and maintenance charges included? does this include cleaning?
- are any shared services such as parking, security, reception staff included? If not how much are these?
- are utilities (gas electric, water, phone/communication lines, air conditioning) included and are they sufficient for your needs?
- how often, and when, will the rent be reviewed?
Your use of the premises
Make sure you consider the practicalities of working day to day in the premises:
- are you able to sublet all or some of the space?
- can you access the building whenever you like or are there restrictions?
- how secure is the premises? Are there security staff? Do they patrol the premises? 24 hours? Are there CCTV cameras and alarm systems, are there physical entry barriers? Can you put them in if you feel you need them?
- above all, do the premises provide suitable working environment for you and your staff?
Renewing the lease
- If it’s a long-term arrangement are there any break clauses where both parties can consider whether they want to continue with the arrangement and when a rent review can take place?
- Is this a fixed term lease? If so you will have to pay all the costs until the agreed end date of the lease, even if you have ceased trading.
- The Landlords and Tenant Act 1954 states that, at the end of the agreement, you have the right to stay in the premises and renew your tenancy provided of course that you have not breached the terms of the agreement. You may be asked to ‘contract out’ of adopting the Act but if you do you should seek expert advice otherwise you will be giving up these rights.
More information and guidance on leasing business premises
For more detailed information see the Code for Leasing Business Premises in England and Wales which is a collaboration between commercial property professionals and industry bodies representing owners/landlords and tenants. The website includes a guide for occupiers, explaining terms and providing helpful tips, and a model Heads of Terms which can be completed on line and downloaded.
Renting business or commercial premises: the checks you should make
Working from home is a definite possibility if all you need is a small amount of space, but if this is not an option you’ll need to consider renting or leasing business premises or commercial premises.
Remember that a lease is a legally binding document, so before signing anything you must be sure you understand every single word and phrase included in it. See our article on Understanding contract property terms for some definitions, but you should seek advice from a Chartered Surveyor, a Solicitor or a Licensed Conveyancer.
There are several pitfalls to be wary of, the first one is making sure that the person you’ll be renting from is the legal owner of the property. Use this handy checklist as a guide to what you should know before you sign the lease on your business premises:
Suitability and fitness for purpose
Find out who is responsible for:
- internal and external maintenance and repair. Check if you’re responsible only for maintaining the premises in its current condition, otherwise you may be liable for damage or wear and tear that occurred before you occupied it.
- ensuring the building meets fire, and health and safety regulations
- insuring the building
- making sure the premises has the right classification of use for your business
- making sure the premises meets the access requirements of the Disability Discrimination Act
Costs and charges
Make sure you know exactly what the costs are and what they include:
- how much is the rent? You need to make sure you cash flow can cope with paying your business rent even if your income is less than you forecast
- when will the rent need to be paid? (it may be weekly, monthly or quarter) and is it paid in advance or in arrears
- how can rent be paid? cash, cheque, paypal, electronic transfer from your bank account?
- is there a deposit to pay? If so how much, and is it refunded at the end of the tenancy?
- does the rent include rates, if not how much are these?
- does the rent include any building insurance or other insurances?
- are service and maintenance charges included? does this include cleaning?
- are any shared services such as parking, security, reception staff included? If not how much are these?
- are utilities (gas electric, water, phone/communication lines, air conditioning) included and are they sufficient for your needs?
- how often, and when, will the rent be reviewed?
Your use of the premises
Make sure you consider the practicalities of working day to day in the premises:
- are you able to sublet all or some of the space?
- can you access the building whenever you like or are there restrictions?
- how secure is the premises? Are there security staff? Do they patrol the premises? 24 hours? Are there CCTV cameras and alarm systems, are there physical entry barriers? Can you put them in if you feel you need them?
- above all, do the premises provide suitable working environment for you and your staff?
Renewing the lease
- If it’s a long-term arrangement are there any break clauses where both parties can consider whether they want to continue with the arrangement and when a rent review can take place?
- Is this a fixed term lease? If so you will have to pay all the costs until the agreed end date of the lease, even if you have ceased trading.
- The Landlords and Tenant Act 1954 states that, at the end of the agreement, you have the right to stay in the premises and renew your tenancy provided of course that you have not breached the terms of the agreement. You may be asked to ‘contract out’ of adopting the Act but if you do you should seek expert advice otherwise you will be giving up these rights.
More information and guidance on leasing business premises
For more detailed information see the Code for Leasing Business Premises in England and Wales which is a collaboration between commercial property professionals and industry bodies representing owners/landlords and tenants. The website includes a guide for occupiers, explaining terms and providing helpful tips, and a model Heads of Terms which can be completed on line and downloaded.