Entering into a commercial lease? Don’t make this stupid mistake

I have been taken aback by the level of naivety I have recently encountered regarding commercial leases. Small business owners, entrepreneurs, solo business owners.

All these individuals I would expect to approach any commercial transaction with a good degree of caution. And scepticism. With a healthy reluctance to accept promises and statements made as part of negotiations, regardless of who makes the statements.

Yet that is not what I have found. I have met a number of individuals in the last 18 months or so whose experience with commercial leases have proven to be disasters.

And when they come to me for advice a quick look at the lease leads to the usual conclusion. The tenant is tied into the lease with no easy way out. Unless the landlord accepts a surrender of the lease.

And why would she do that?

Many of the catastrophic problems could have been avoided by taking some basic steps before signing up for the lease. For example, in having a structural survey of the premises carried out.

The tenant might say they had a look at the premises themselves or had a friend/relation who has some building or diy experience inspect it. But that is not good enough. Not by a long way.

This approach is amateur hour stuff, quite frankly.

Onerous obligations

If you are entering into a lease by which you must pay rent for a term of 5 or 10 years with no way out you can soon become overwhelmed by difficulties when you recognise there is no way out of the lease. And maybe you have been forced to close to carry out some essential repairs.

Or spend money putting right what you might have identified as a problem had you engaged a professional to carry out a proper survey.

Or you are unable to trade for some other reason that would have become apparent by basis scrutiny of title and planning documents, together with a physical survey before entering into the lease.

Naivety and impatience are things I might expect from a complete novice. But some of these mistakes have arisen with business owners carrying on a business for years.

They appear to see only one thing: some ticking clock in their mind, a date by which they must be in the premises no matter what.

This does not make for good decision making, as you can imagine.

This type of behaviour is irrational and something I cannot understand.

I spend a lot of my time holding clients back from rushing into stupid agreements, especially onerous leases with no break clauses or no rent free period or other way out of the lease if things don’t work out.

Everyone who starts a business is hopeful. Some are confident. But be smart. Carry out your due diligence-legal and physical.

Be patient. There will always be another premises, another lease, another opportunity.

That is the nature of business.

But don’t be one of those who naively rush headlong into a rash decision which is bound to haunt you sooner rather than later.