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An opportunity to add more flexibility to your business.

Byline: By Richard Bullen

For business occupiers in the North-East, a lease renewal presents an opportunity to secure greater flexibility, long-term security and an agreement that specifically matches future requirements of the firm.

Pressure on the commercial letting market has seen landlords become more adaptable and realistic in formulating lease terms that match the needs of particular businesses.

This has meant that over the last five years, leases have become shorter and more diverse, giving tenants a choice of alternative terms and flexible leases that tie in with the current, medium, and long-term goals of the business.

For firms that have been occupying the same property for a long period of time, a lease renewal provides the opportunity to undertake a full audit of lease terms and negotiate improved conditions.

Many businesses have older agreements out of step with the current market and they are in a good position to renegotiate leases that best suit their business in its current stage of the lifecycle.

Similarly, older leases may contain clauses which may have been considered innocuous when first signed but which could potentially be onerous on the tenant.

An audit of lease terms ahead of a renewal can flag up future liabilities for which early provision can be made and it can also identify clauses which might present an opportunity to secure preferable terms in the future.

Tenants need to be aware of their ability to negotiate increased flexibility in their leases and to ensure that it includes consistent review dates, consistent methods of valuation and removes restrictions on future assignment or subletting.

Key points that a tenant should consider ahead of a lease renewal include:

* When did you last read the lease/s of your occupied properties?

* Is the lease straightforward? Does it contain any clauses or provisions that are unusually onerous or beneficial?

* Is there a rent review or break clause in the near future?

* When does the lease expire? If there is a lease renewal in the near future, what are the merits of renewing on different terms?

* How does this tie-in with business plans?

* Is there an opportunity to sub-let part of the accommodation or otherwise relinquish the obligation if necessary?

The Code of Practice for Commercial Leases, introduced in 2002, was put in place to ensure the rental market provides increased flexibility for occupiers but knowledge of the code can be limited amongst tenants, especially smaller businesses.

By looking in detail at lease terms, a business may find routes to effectively renegotiate and secure greater flexibility and long-term security.

The property market has moved on significantly over the past few years and by making the most of the flexibility currently available in the market, firms can negotiate lease terms that best suit their business in its current form and also ensure that leases operate to benefit the business as it develops.

Richard Bullen is a professional advisory services director at DTZ Debenham Tie Leung
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Publication:The Journal (Newcastle, England)
Date:Feb 16, 2005
Words:489
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