The bigger picture: top tips for lease negotiations

Each transaction will always be unique however there will often be common pain points when clients are looking to take a new lease of a store – a good way to avoid these often starts with:

1. Agreeing clear HOTs

First impressions are always important and that starts with the initial discussions as to terms of the lease. Heads of Terms (HOTs) will set out key terms agreed such as; the term, the rent (including any rent reviews), the property, the permitted use and any deal specific conditions such as break clauses. Whilst the Heads of Terms are not legally binding it will be difficult to get landlords to agree to depart from them after they are settled so it is crucial that you understand, and are happy, with all of the terms that you are agreeing to.

2. Building in flexibility

Make sure that if plans change within the business, your leasehold arrangements are as flexible as possible to also move with these changes. This could include:

1. 1. An agreement for lease. An agreement for lease can help alleviate any uncertainty as to when you will be required to complete the new lease and is often conditional on various triggers – i.e. vacant possession of the unit, the grant of listed building consent or the landlord approving your fit out plans. Without a conditional agreement for lease, you are largely beholden to the timings of the landlord or a set completion date.
   2. Ability to assign. Make sure you understand when and how you could potentially underlet or assign the lease. Any overly restrictive terms could potentially impact the value of the leasehold interest and leave you wrapped up in a sticky situation.

3. Planning an exit strategy

What happens if things don’t always work out – are you able to exit a location/lease as cleanly as you would like?

1. 1. Break clauses. The ability to terminate a lease early allows for flexibility around timings. Break clauses need to be reviewed carefully, particularly, if they are conditional on fulfillment of certain conditions and your solicitor will be able to advise on these and the timings surrounding service of any required notices.
   2. Refunds. Usually payments for service charge or rent are made in advance. If you are intending on leaving the store, your lease should cover the ability for you have a refund on any pre-paid amounts given that these could be particularly substantial.

4. Equally, what happens if you want to stay longer – can you?

The default position under the Landlord and Tenant Act 1954 is that unless the lease states otherwise, the tenant will have a right to a new lease on expiry of the old lease term. The landlord can only object to the grant of this new lease if they can establish certain grounds. If the lease is ‘protected’ by the Landlord and Tenant Act 1954, this could be an invaluable right should a particular location be absolutely imperative. If the lease is granted outside of the Landlord and Tenant Act 1954, then there is no statutory right to renew. The landlord will serve on the incoming tenant a prescribed form notice which state that they parties have agreed that this is the case.

5. Have a team that will fight your corner

Above all, having the right team on board from the start who will fight your corner on the above points will be crucial. The key players will be your solicitors, agents, accountants and any technical teams (for generating fit out plans, obtaining planning permissions).

How we can help

For more information on anything in this article our retail and leisure team who would be delighted to help.