If we only agree the length of the lease and the amount of rent, we have left perhaps a dozen other terms and conditions which will not be tailored to the needs of the business. Does that matter?
In a typical commercial lease of about 40 pages, you can expect about 1½ pages to be clauses the landlord agrees to be bound by. They will vary depending on circumstances and they are a topic of another article. The point being that the other 38½ pages will include obligations, liabilities, duties and costs which fall upon the business, as tenant. Is there another contract in which a business owner would leave that much to chance?
It is always easy to negotiate on matters we understand. Money and time are in that category. How much and for how long. Knocking the rent down always feels positive and we may even get some time at the start of the lease before the rent kicks in – rent free period. The landlord has said how long the lease is to be, so that’s OK. But is it?
It is not that common to be in a position to negotiate. We don’t bargain over our trolley of shopping or a tank of diesel so it is understandable that when presented with a contract containing dozens of terms, the business owners may not know where to start to make it work for the business. If you don’t know what you don’t know, you are a bit stuck going forward.
What we can’t do is leave it to our solicitor to sort out. By the time it goes to the lawyers, the deal is agreed – crystallised – and cannot easily be “unagreed”. To try, is a very unsatisfactory and costly, up-hill struggle.
So how does a business owner get to grips with the opportunity a new commercial lease presents, to tailor its terms to the needs of their business? A good starting point is their own business plan. As the road map of a company, the business plan defines a whole range of parameters for the business: what it does, who it sells to, how many staff it employs and what skills they have, what technology it needs and so on. It is equally possible to use the business plan to help decide what premises it needs and the right lease terms.
So, by generating a property strategy from your business plan you can determine the physical attributes of the premises that will best suit your business – where, what size, what equipment; and then the terms it is going to be necessary to negotiate within any agreement – lease or licence, and therefore give your business the best chance of succeeding in its new premises.
Culverwell Consulting advises SMEs and start-ups on the complexities of acquiring business premises, through training, mentoring, full service consultancy, and using 30 years’ experience in commercial property transactions. Call, email or visit the website to find answers to your questions.