Premises For Your Business

For most businesses, the biggest financial risk they take is when they sign a commercial lease. For even modest premises, the commitment you make when you sign a lease can often be greater than the value of your family home.

For example, a client was recently buying a night club, which involved taking on the commercial lease for the premises. The lease proposed by the landlord was £40,000 per year, with a term of fifteen years.

15 years x £40,000 = £600,000

Had client  just signed the lease, he would have entered a contract to pay the landlord the full amount – irrespective of how the night club performed financially. So if it had no customers and had to close after a few months, our client would still have owed the £600,000. Alternatively, if it became the next Hacienda, and needed to move to the bigger building just next door, the landlord would still get his £600,000.

We negotiated on our client’s behalf to change several important terms of the lease. Crucially, we got the landlord to agree to a ‘Break Clause’ at twelve months, giving our client the option of just handing back the keys at the end of a year. We also took a careful look at who was responsible for the fabric of the building, and took steps to protect our client from the landlord suddenly deciding that it needed a new roof financed by the tenant.

Remember, if you’re a sole trader rather than a limited company, when you sign a commercial lease you are personally liable for the debt. Similarly, some landlords insist on personal guarantees to get around the protection of a limited company.

The implications of signing a commercial lease can be financially disastrous. So NEVER sign one without first taking the best legal advice you can afford, from a solicitor who specialises in commercial property law.

If you are looking for commercial premises, get in touch to talk over what’s involved to make sure the lease you eventually sign is properly fair and doesn’t end up costing more than you can afford.