When a new commercial lease is being negotiated there a great many things to consider, but the five following issues will inevitably be on the agenda.
The landlord will want the highest rent at the earliest opportunity, the tenant may be looking for a rent-free period or a low rent in the first couple of years.
Length of Term
A lease is a commitment by the tenant to abide by the obligations in it for the length of the term, in particular to continue paying rent. Either party may be looking to the long-term, for example the tenant may want a long lease if it thinks that the business being carried on may eventually be sold with the remainder of the lease being part of the package. On the other hand a landlord may want a shorter lease if it has plans in the medium term which do not involve the tenant.
Nowadays, tenants often want to have the opportunity to end the lease at some point during the term. It is also not unheard of for a landlord to insert a “break clause” in its favour, perhaps to take advantage of a development opportunity.
Usual starting point from the landlord’s point of view is to insist on a “full repairing lease”: essentially this means that the tenant is obliged not only to maintain the property in good condition but also to make good any wants of repair that exist at the beginning of the tenancy. A tenant should therefore consider mitigating this repairing obligation, this is usually done by agreeing a schedule of condition itemising those defects which the tenant will not be obliged to address.
Security of Tenure
A commercial tenant will have security of tenure in most cases unless it has been deliberately excluded by agreement between the landlord and tenant. Security of tenure strengthens the tenants bargaining position at the end of the term, but some landlords have a policy of never offering security as part of the deal.
As is no doubt obvious, these different factors can all impact on one another in the negotiation, with a degree of compromise on each side. What is important is that each party considers its position by reference to these factors as well as all others relevant to a particular property before concluding a deal. If the main points have been considered and understood at the outset then the transaction is going to proceed much more smoothly from there on.