Your Business Property Lease - Clauses To Watch Out For

Once you have chosen a franchise and are ready to start your new business, you will need a location to operate from. Unless you are planning to run a home-based franchise, it is likely that you will need to lease a business property, but this can be a tricky area to navigate if you are not adept at interpreting the terms of lease agreements.

There are a number of clauses that could raise concerns, and if these are included in your lease contract, you should consider selecting an alternative location, negotiating with the landlord or seeking legal advice.


Work, Termination and Relocation clauses

The type of work that you will perform at your business will affect the cost of setting up the space. If high setup costs are expected, you will need to be mindful of any termination and relocation clauses specified by the landlord.

Landlords may specify a notice period in which they can ask the tenant to vacate the site or relocate to a different site at their own expense if they decide to sell or demolish the building. This relocation can impact your business' reputation in addition to raising your planned expenditures. If you are not completely content with the suitability of the location for your business purposes or the notice period is insufficient for you to operate uninterrupted for a suitable duration, you should consider withdrawing your interest.

Alternatively, you might try to negotiate for a clause to be included specifying that the landlord will compensate you in the event that they attempt to relocate you to an unsuitable location.


Properties have different risk levels

The location of the property will affect your risk appetite. In general, a landlord in a busy shopping mall is less likely to impose troublesome termination and relocation clauses than those who own a standalone building.

This is because electrical work and other maintenance activities in a shopping center will impact a large number of businesses, so the work will likely be timed to minimize disruption. The building is also less likely to face demolition thanks to its community appeal.

The downside to opting for a site in a shopping mall is that the terms of the lease agreement are generally fixed, with little to no option for negotiation. Landlords of standalone buildings, particularly those that have been vacant for a prolonged period, may be more open to negotiation but may be more inclined to sell the building if they receive a suitable offer, which could significantly disrupt your business operations.


In conclusion

You should make sure that the terms of the business property lease agreement are satisfactory before proceeding. If you have any doubts, seek legal advice to alleviate your concerns.