When you’re negotiating a commercial lease, there are a lot of factors to consider. And one of the key aspects to consider is the length of the lease. Commercial leases typically span anywhere from 3 to 20 years, with the most common length (in our experience) falling between 5 to 10 years. Negotiations must be handled with care, and it’s always best to enlist the support of a seasoned legal team that will work to deliver the best outcome for you and your business.
Long or short lease?
While landlords prefer longer leases to ensure stability and consistency, tenants often require more flexibility to accommodate evolving business needs such as relocation or expansion. It’s crucial to select a property with a lease length that matches your business objectives and provides the desired level of flexibility.
What to consider when negotiating your commercial lease
Negotiating the perfect commercial lease can feel like an up-hill battle. But by keeping a few factors in mind, you’ll be able to negotiate a lease that works for you:
Cost
Selling or underletting a lease can be time-consuming and costly, so it’s essential to get the lease term right from the start. When negotiating a lease, it’s also important to take external pressures such as Stamp Duty Land Tax implications into account, as the amount of SDLT payable can increase with the length of the lease.
Flexibility
Remember, though, it’s not always black and white. You can negotiate leases with more flexibility such as short leases with options to renew, rather than longer leases with break clauses.
Additional fees
It’s worth noting that a lease of more than 7 years requires registration at HM Land Registry, incurring additional costs.
Future-proofing
In any event, for a lease of more than 5 years, it is normally a good idea to include a tenant break clause to allow for early termination, if necessary, which will provide greater flexibility for the future.
Expert negotiation
When negotiating the lease term, it’s vital to consider all relevant factors and ensure that both parties’ commercial objectives are met. It’s always best to consult a commercial property expert to ensure you’re getting the most out of your lease. Ultimately, choosing the appropriate lease length is a crucial aspect of entering into a commercial lease, and careful consideration of all relevant factors is necessary to make an informed decision.
Our expert team is always on hand to advise, handle negotiations, and draft up a commercial lease that meets your needs. And if you’re weighing up between buying or leasing a commercial property, read Darren Firth’s expert insight here.