Commercial Lease – the length of term

When it comes to negotiating the term of the lease, there is no right or wrong length of term.

Short leases are considered to be for any term that is less than 10 years and long leases are considered to be any term beyond that.

The length that is sought by the tenant will really depend on its individual circumstances as there are advantages and disadvantages associated with each type.

Short term leases

This is ideal if the tenant is starting a new business. Most new businesses take time to establish themselves and become profitable, so if the tenant is finding it difficult to finance the business in its early years, then having a short term lease will mean it will be liable for rent relating to a short period.

On the other hand, the business may grow and the tenant may find that it needs larger premises. Having a long lease could restrict the business from growing.

Tenants need to bear in mind that there is always the possibility to renew the lease at the end of the term, though the landlord has the right to refuse and lease the property elsewhere.

Long term leases

Where the tenant has a business that is established and plans to stay put then a long lease term may be preferable. It gives the tenant assurance and allows it to make long term plans.

It can be expensive for the tenant if it wants to break the lease early and the lease does not contain a break clause, as the landlord is entitled to rent for the entire term of the lease.

If you are a landlord or a tenant of a new lease, then contact our Commercial Property Department and speak to one of our solicitors who will be happy to assist you.

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