Negotiating a commercial lease

Prosperous1

Hi.
I am in the process of Negotiating a commercial lease on a second garage to expand my business (tyre fitting and this one will also provide mots)
Initially I removed my interest as the rent asking was too high (22k).
The property agents have since found me via a simple Google search of tyres in my area (my seo is fantastic) and told me the owner is willing to move on rent maybe around 18k. This is still over priced based on local similar properties and also having viewed the business rates I can see that the rate bale value is just over 15k, which is linked closely to past rent.
With this in mind I've said I would only be willing to pay 15k per annum as the rates are 7200 a year too.
He has said the landlord would move down but maybe not to that level if I took out a five year lease... instead of the three originally sought.
I have asked for an incentive to move in as there are alternative properties although if truth be told this would be the most viable and beneficial to me and my growing business. I am after a rent free period. He has now come back and said his client has indicated he would be happy with a 10 year lease with a break clause at 3 years. I have insiSted any break clause is only to be triggered by tenant. Still not have a figure and waiting for him to come back to me next week now my accountant has given him references as to my standing and business interests.
I'm not overly keen on 10 years tbh as at one point I had a busiNess with 50 staff turning over a million plus a year then the recession hit and next year it was gone.
Any pointers please on negation points. What is an acceptable or average rent free period? Anything else to consider I've not thought of. I've already said that although a full insure and repair lease I want a clause to return in same state ie no betterment of existing demise.
If youve made it this far thanks and appreciate any advice

lincroft1710

A 10 year lease is not unusual.

You know your business and I trust you know the availability of suitable premises and number of empty premises. So is a 10 yr lease so onerous and is it a landlord's or tenant's market. Have these premises been empty for a long time, is the landlord desperate to secure a tenant?

Rent free period could be 6 or 12 months dependent on length of lease. See what LL offers, then come back and tell us.

Prosperous1

Thanks. I thought it wasnot the normal as my current lease (with the council) was 3 years then I realised sighed for 5 at the expiry. I know other people on similar units that are on 3 year initial leases as the landlords agent initially indicated it would be, hence the surprise at it now being suggested 10 years

lincroft1710

With a 10 yr lease, as a tenant a 3 yr break clause isn't a bad deal, a 5 yr break clause appears to be more usual.

Prosperous1

Thanks again lincroft. I suppose my hesitation comes from having a huge business before. All going swimmingly. Then within 12 months losing it all after the recession. No one can foresee the future as much as I would love too. Anyway he hasn't even come back with rent levels yet so let's just wait and see what tonorrow brings...

paddyrg

I think your negotiation has been pretty clear so far, but you must get the lease drawn up through your own lawyers, a single clause could change the whole balance. If you're looking for negotiation points, who is responsible for the building fabric? It's not unusual for a commercial lease to push repairs to the tenant, so it's a gamble if the roof will leak and need replacing in year 4 or not. If you can push a clause regarding responsibility for the building/fabric to be maintained by the freeholder, I'm sure at some point in a decade you'll be grateful.

Prosperous1

Thasks paddy. Tbh I took for granted that a full repair and insure lease was exactly that.fix any problems that arise. I will be having a betterment Clausee so thought this would cover these eventualities. Such as roof leaks I patch it up... but not re roof... I wasn't aware you could exclude the building/ fabric from your responsibilities as a tenant. Definitely given me food for thought

jamesperrett

Always worth having a good, local commercial property lawyer working for you. Not only will they know the legal niceties but they will probably have a good idea about the state of the local market too.

zcrat41

I'm a commercial landlord and I never agree to rent free periods - especially with a new ish business (which I class yours as because you say you've had a previous business). What I would agree to is a stepped rent I.e if a tenant wanted 3 months rent free I wouldn't agree to that but I would agree to the same amount as a discount spread over three years.

rhysadams

If you don't mind paying the 18k per year, offer him 15k per annum with a 3k mainteance charge to keep your rent below the rate threshold.