Checklist of Commercial Leases

The following factors need to be watched when you are negotiating your commercial lease.

  1. Guarantee. The landlord will sometime require a personal guarantee from directors if the lease is taken out in the name of a company or other entity.

  2. Rent Ratchets. Some leases state that when the rent is reviewed it can never be lower than the rent paid in the previous 12 months.

  3. Assignment. Check whether the lease can be assigned and also if once it is signed, who will have the ongoing responsibility. In general if the party to whom the lease is assigned does not meet their obligations then it will fall back on you as the person that has signed the lease.

  4. Landlords Costs. Look at who is to be responsible for the landlord’s legal costs as well as the landlords insurance.

  5. Term of the Lease. You may have to think a little about the term of the lease that you will be taking. If you are a new business and you lock yourself into a five year lease and the business does not work out, then you are liable for five years rent even though the business has failed and closed up. It may be a good idea to go for a shorter term lease with a right of renewal.

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