Bruton Knowles were proud sponsors of the Small Business of the Year category in this year’s Gloucestershire Echo and Gloucester Citizen Business Awards.
And for many growing and start-up businesses, signing the first lease on a property is something to be celebrated.
But it is also something small businesses should do carefully.
Robert Smith, head of agency at Bruton Knowles’ Gloucester office, said it was important to ensure you don’t sign a lease for longer than you want to, as it is a binding legal agreement.
If your requirements change you may be able to sub-let the property or assign the lease, but that can be a costly and time-consuming process, with no guarantee of a successful outcome.
Robert Smith said: “Signing a full repairing and insuring lease means that you are liable for the cost of any repairs to the property from that date, regardless of what condition it was in when you moved in.
“So check what your responsibilities are and how much it might cost to maintain the property (inside and out), over the term of the lease.
“You shouldn’t sign an FRI lease on commercial premises without having its condition independently checked.”
Disputes can arise over service charges. These should be set out in the lease but often people concentrate on the headline rent to be paid, and only later realise that the service charge is more significant than they thought.
Robert Smith explained: “Fortunately for tenants, regulations have been tightened up in recent years, and landlords are no longer permitted to treat a service charge as rent going by a different name, but they have to account for the expenditure properly, and provide audited accounts at year end.
“The service charge can be almost as much as the rent in some instances, and one way to protect against any unforeseen major expenditure items is to ask for a cap on the level of service charge payable.”
Break clauses can be a good insurance policy enabling a tenant to exit from a lease if business levels do not live up to expectations or the business rapidly expands and needs to move somewhere bigger.
They are also fraught with difficulty, and the detailed wording is critical to ensuring that the break can be correctly operated.
“Another thing to check is when and how the rent will be reviewed. It is common to find that a lease contains what are called “upward only” rent reviews, which mean that the rent can never fall below the original level, regardless of prevailing market conditions,” said Robert.
“Agreeing upward or downward reviews at the outset can pay dividends further down the line.
“Tenants often believe they have no need of specialist advice as their solicitor will provide all the advice that is required. However this can be a false economy as a solicitor may not be able to comment on property issues.
“Even if you get on with your landlord before the lease is signed, always remember that circumstances can change, and when they do the only thing defining the position between the parties is the precise wording of the lease.”