Renting a commercial space for a retail unit or a shop is not entirely different from a residential landlord and tenant agreement. As a shop owner renting a space you will sign a tenancy agreement with the owner of the retail complex or commercial space and both of you will be bound by the terms of the agreement.
What to include in a shop lease
The main clauses of a shop lease should include the basics such as:
- Landlord and tenant’s details (full names and addresses or, if they act for a company, their registration number if incorporated in England and Wales and address of the registered office)
- Address or description of the property the lease relates to (if it is a retail unit within a bigger shopping complex the description might require references to an attached plan of the complex, such as Unit A, ground floor, marked red on an attached plan)
- Term of the lease: the length of time which the lease is granted for. This is normally negotiated before the lease is agreed and is usually fixed for a term of 5 or 10 years
- Break clause and notice required if any of the sides decides to terminate lease early
- Amount of rent (and whether it is inclusive of service charge for maintenance) and periods of payment (monthly, quarterly, yearly)
- Rent review clause might apply on landlord’s discretion, this will take place after set periods of time
- Alterations clause: the tenant might be permitted small alteration or none, the landlord’s consent might be required for certain alterations
- Decorations and repairs: specify who is responsible for alterations and whether the tenant is permitted any decorations and if so, who will be responsible for bringing the property back to its original state
- Subletting: some landlords may agree for their tenant to sublet part or all of the property during their lease
- Landlord and tenant’s obligations under the lease such as rubbish disposal, maintenance, external repairs, health and safety regulations etc.
- Indemnity: the landlord might require the tenant to indemnify him against any expenses, claims, damage or costs for the duration of the lease
- Purpose of the lease: the type of use the tenant is signing the lease for. The shop may only be let for a certain purpose such as grocery store and the landlord will oppose any change of use such as electronics or a hot food café.
- Returning the property back to the landlord at the end of the lease: this clause specifies who is responsible for making the property usable for the next tenant.
Negotiating a shop lease
Negotiating a commercial lease is more complicated than a residential lease and it might be a good idea to instruct solicitors to lend expertise in the process. There are commercial implications for the business which must be taken into account when negotiating a lease such as whether this particular property the best solution for the business’ purposes: is it in the convenient location, does it have all the required amenities, will it profit the business to have a retail unit within a shopping complex or would it benefit from a high street location etc.
A shop owner should have a clear vision of what they would like to achieve by renting space for a new shop and a commercial lawyer’s expertise could prove useful in clarifying the implications and terms of a shop lease.
Drafting a lease
Once the terms of a lease are negotiated and agreed between the landlord and tenant they should be written down in a matter which is clear and understandable for both parties. This again can be facilitated by instructing us to make sure all the required formalities are in place.
What next
Get in touch today for a quote whether you are a Landlord or a Tenant considering entering into a lease for shop premises.