Real estate
As your business grows, you may wish to take office or lab space at Discovery Park or further afield.
Make sure you understand the terms of any lease you sign!
Key Considerations for Signing a New Lease
Before entering into a new lease, tenants should carefully consider and agree upon the followings terms to avoid negotiating key issues during the drafting process:
Term
Decide on the lease duration and whether it provides sufficient business flexibility. Determine if an automatic renewal option is needed; landlords may restrict this for shorter leases.
Break
For long-term leases, consider including a break option for flexibility. A break clause allows termination before the lease end if business needs change. Note that landlord might also request a break clause for their benefit.
Rent
Clarify the rent amount, review terms (eg. Market review, RPI, CPI), payment schedule (monthly or quarterly) and whether VAT applies. Determine if any rent-free periods, deposit or guarantees are required.
Service Charge
Confirm if a service charge is payable in addition to rent, request an estimate and negotiate a cap. Understanding these costs helps tenants budget effectively.
Insurance
Typically, landlords insure the property, with tenants contributing to premiums and covering contents insurance. Ensure insurance costs are clear and budgeted.
Term
Break
Rent
Service charge
Insurance
Decide on the lease duration and whether it provides sufficient business flexibility. Determine if an automatic renewal option is needed; landlords may restrict this for shorter leases.
For long-term leases, consider including a break option for flexibility. A break clause allows termination before the lease end if business needs change. Note that landlord might also request a break clause for their benefit.
Clarify the rent amount, review terms (eg. Market review, RPI, CPI), payment schedule (monthly or quarterly) and whether VAT applies. Determine if any rent-free periods, deposit or guarantees are required.
Confirm if a service charge is payable in addition to rent, request an estimate and negotiate a cap. Understanding these costs helps tenants budget effectively.
Typically, landlords insure the property, with tenants contributing to premiums and covering contents insurance. Ensure insurance costs are clear and budgeted.
Use
Define the permitted use of the property, keeping it broad to facilitate potential lease transfers in the future.
Alienation
Check if the lease permits transferring, sub-letting, charging, or sharing the space with group companies. Such dealings usually require landlord consent.
Repair
Assess the property’s condition. If it's in poor shape, consider documenting the current state (schedule of condition) to limit repair obligations. Be aware that if responsible for maintaining the property’s condition, tenants may face costs to improve it even if it starts in poor shape.
Alterations
Structural alterations are typically prohibited, while internal, non-structural changes may need landlord approval. Discuss alterations early, and note that tenants may be required to remove these at the end of the term.
Use
Alienation
Repair
Alterations
Define the permitted use of the property, keeping it broad to facilitate potential lease transfers in the future.
Check if the lease permits transferring, sub-letting, charging, or sharing the space with group companies. Such dealings usually require landlord consent.
Assess the property’s condition. If it's in poor shape, consider documenting the current state (schedule of condition) to limit repair obligations. Be aware that if responsible for maintaining the property’s condition, tenants may face costs to improve it even if it starts in poor shape.
Structural alterations are typically prohibited, while internal, non-structural changes may need landlord approval. Discuss alterations early, and note that tenants may be required to remove these at the end of the term.
Additional Considerations - post heads of terms
Searches - Consider carrying out searches against the property including a search of the local authority, drainage and water provider, an environmental and flood search, and a search as to chancel repair and the extent of the adjoining highways. These searches will give you further information about the property.
Landlord replies to standard enquiries – Review the landlord’s responses to standard enquiries, including energy performance, fire risk assessment, and asbestos surveys. Request a gas safety certificate and electrical safety report if relevant; otherwise, it becomes the tenant’s responsibility.
SDLT and Land Registry fees – Determine if Stamp Duty Land Tax (SDLT) is due upon the lease grant and if registration is required.
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