Before You Sign: Reading Tenancy Agreements

Moving into your first commercial space is a big milestone, and it’s important to understand what a commercial tenancy agreement involves.

Here’s a simple guide to help you sign your next commercial lease with confidence:

What Is It?

Unlike a residential lease, a commercial tenancy agreement can be more complex and carry greater financial responsibility.

This legally binding contract between you and the property owner sets out the essential terms which will apply throughout the duration of your tenancy.

Key Components

Lease Term:

How long you agree to occupy the property, typically 3-5 years for commercial agreements.

Rent:

The amount payable and how often, typically monthly.

Outgoings:

Additional costs, either worded as statutory outgoings or building outgoings. There are several ways which a landlord can recover these costs. Every outgoings structure is different, and it’s important that the terms are clearly understood by both parties.

Security Deposit/Bond:

The amount held by the property manager or landlord for the duration of the lease. In accordance with the Leases (Commercial and Retail) Act 2001 the security amount held cannot be more than the equivalent of 3 months’ rent and must be in an interest-bearing account.

Permitted Use:

What type of business is allowed to operate on the premises in accordance with the Crown Lease

Option Period:

The potential extension period after the initial term. Typically agreed to before signing, and executed prior to the expiry of your first term.

Important Clauses to Understand

Annual Reviews: The increases in rent that occur upon the anniversary of the lease commencement date. There are three methods at which a rent review can be applied: fixed, CPI or market review.

Make Good: Your obligations regarding the condition of the property at the expiry of the lease. Standard expectations include things such as paint patch works and furniture removal.

Assignment/Subletting: Outlines the requirements before a lease is assigned to another entity or the area is sublet.

Other common lease obligations can include maintenance, insurance, trading hours, and more.

Signing a commercial lease is a big step for any business, and it’s important that the terms are viable for your business to be successful. Having a solicitor review the agreement before signing ensures you fully understand your obligations and avoid surprises later.

By understanding the basics and seeking professional advice, you’ll set yourself up for a strong foundation for growth. Civium can guide you through the process and help you secure the right property for your business.

Disclaimer: This article is for general information purposes only and does not constitute financial, tax, or legal advice. You should seek independent advice from a qualified professional to assess your specific circumstances before making any decisions.