Mitigating risks in commercial property leases

Leasing commercial property is a major commitment for any business, whether you are a start-up seeking office space locally or an established company expanding into new premises across Lanarkshire. A well-negotiated lease can provide stability and security, but failing to address potential risks can lead to significant financial and operational challenges. At Ness Gallagher, we help businesses navigate commercial leases effectively, ensuring that risks are minimised and interests are protected.

Some of the key risks we come across:

• Unfavourable lease terms – many standard lease agreements are drafted in favour of landlords. Without careful review, businesses may find themselves locked into unfair terms, such as excessive rent increases or limited rights to modify the property. It’s therefore important to always negotiate key lease terms, including rent review mechanisms, lease duration, and break clauses, to ensure they align with your business’s needs and financial capabilities.
• Hidden costs and service charges – beyond the rent, commercial tenants may be responsible for additional expenses such as service charges, maintenance costs, and property insurance. Unexpected costs can quickly escalate and affect profitability so ensure you have full transparency on additional costs before signing the lease. You could even consider negotiating a cap on service charges to prevent unexpected financial burdens.
  
• Repair and maintenance responsibilities – commercial leases often require tenants to maintain and repair the property, sometimes even restoring it to its original condition at the end of the lease. Clarify your obligations under the lease and where possible, negotiate a "schedule of condition" to limit your responsibility for pre-existing issues which can help to avoid costly repairs upon exit.
  
• Limited flexibility to exit or modify the lease – even with the best laid plans, nobody knows what the future holds. A lease that lacks break clauses or assigns rigid terms can become a liability if your business needs change. If subletting is an option, ensure this is clearly permitted in the lease agreement.
  
• Disputes over rent reviews – some leases include rent reviews that allow landlords to increase rent periodically, often based on market conditions. Ensure that these rent reviews follow fair and transparent procedures.
  
• Restrictions on use and alterations – leases may contain restrictions on how the premises can be used, as well as limitations on making alterations to suit business operations. Although this may sound obvious, it is important to review these clauses carefully and negotiate any necessary permissions in advance, particularly if your business requires specific fit-outs or modifications.

Negotiating a commercial lease requires careful consideration and legal expertise. Our team has all the legal skills you would expect, but just as important, deep knowledge of the local market, a network of helpful connections, and a reputation as skilled negotiators to ensure we help our clients’ businesses secure favourable lease terms while mitigating potential risks. Before signing any commercial lease, seek legal guidance to protect your business’s interests.