If your business is expanding, you may well need additional space.

Leasing can be more attractive than buying. You need less capital outlay up-front, and terms can be flexible.

The main points to consider are:

  1. Which entity should take the lease? – the lease will become a liability for that entity. Be aware the landlord may request a rent deposit or guarantee if it has doubts on covenant.
  2. How much space do you need? How long for? Do you need the ability to end the lease early, e.g. halfway through? – if not, then a longer rent free or lower rent may be on offer.
  3. The premises may become surplus to your requirements unexpectedly – so try to ensure your ability to assign (sell) the lease or sub-let isn't too restricted.
  4. Traditional "open market" rent reviews can produce shock increases in boom times – so consider asking for any rent increases to be linked to e.g. RPI (or the lower of "open market" and index-linked).
  5. If the premises are part of a multi-occupancy building or industrial estate, Service Charges (a share of the cost of common services) may be payable. Request previous Service Charge accounts, and consider asking for a cap (either just for the first year or two, or only increasing in line with e.g. RPI) – so your outlays are more fixed. Check the level of rates too (the tenant usually has to pay these).
  6. Have a lawyer check the title deeds for any important title conditions – e.g. use restrictions.
  7. A lease usually makes a tenant responsible for repairs – so consider a Schedule of Condition recording the state of repair at lease start, plus an obligation only to hand the premises back in that state when the lease ends.
  8. If your needs are short-term, consider flexible-leasing options, e.g. serviced office accommodation – often more expensive, but better if you only need space for a few weeks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.