What you should know about your lease
Does your business lease premises? It’s easy to file your lease away with your other important documents and forget exactly what it says. Then suddenly you can be caught short when your renewal date rolls around. Here are the important dates and information that you should know about your lease. Put the dates in the calendar and keep this information somewhere handy.
Lease renewal or end date
Do you have the right to renew your lease or do you have to renegotiate the lease with your landlord? If you want to renew the lease, how much notice do you have to give?
Reinstatement
If the lease ends, you will usually have to return the property to its original condition, including removing any alterations that you have made to the premises. The costs of reinstatement can be high, especially if you have made substantial alterations to the property. It can be worthwhile discussing this with your landlord. If your alterations have added value to the property, the landlord might be willing to let you leave them in place.
Rent reviews
What are the rent review dates and how frequently can they occur? Are rent reviews based on ‘market rate’ or CPI or some other measure? Do you know what the process is for challenging a rent review if you disagree with the rental assessment?
Some leases contain “ratchet clauses” which prevent the rent at a review being less than the rent at the date that the lease began. Does your lease contain a clause like this?
Right to assign
Do you have the right to assign the lease of your business premises to someone else? If you want to sell your business, the sale could be conditional on you assigning the lease to the buyer. If your lease doesn’t allow assignment, it might be worth asking your landlord to agree to remove this clause or agree that it doesn’t apply if you are selling your business.
If you know the basics of your lease, you’re less likely to get caught out by unexpected clauses. If you’re having trouble or want some help reviewing your lease, contact our team.