When negotiating a lease for an office space, particularly in competitive markets, securing favourable terms can yield benefits beyond cost savings.
It’s crucial to understand your requirements before starting your search and committing to an office. Consider factors such as size, budget, and the type of office in advance. Office spaces in Central London and other major UK cities are close to transport connections, so if you are still searching, stay open-minded about areas.
Our 14 tips will put you in the best position to negotiate a lease for a traditional/leasehold office. It is important to note that most points may not apply to serviced offices as they require a licence agreement.
1. Offer Less Than the Advertised Price
The first step when negotiating an office lease is ensuring the rent is either market rate or below. Make sure you research office pricing in the area and compare it to the price you are offered.
In London, pricing can vary significantly depending on the location, so this step can save your business a lot of money in the long term. Use current pricing data if the space happens to be serviced.
2. Ask For a Suitable Lease Length
The lease length is one of the most important factors for your business. Shorter leases allow flexibility for businesses in a phase of uncertainty or anticipation of expansion. On the other hand, longer leases will guarantee the space for longer at the same rate.
3. Ask for a Break Clause
A break clause in a lease is a provision that will allow you (and sometimes the landlord) to terminate the lease early under specific conditions. This clause can specify a particular date or dates when the lease can be ended, or it can be a rolling break clause, which allows termination at any time during the lease term.
Break clauses protect your business from being locked into long contracts, allowing either party to terminate the contract early after a set period.
In addition to making sure that your contract has a break clause, ensure the terms of the clause are clearly defined and fair to both parties.
4. Request a Rent-Free Period
As an incentive to attract clients, many landlords (particularly in London) will agree to rent-free periods when offering a lease.
These rent-free periods can offer significant savings. Businesses can use this to their advantage when negotiating, especially if you are setting up a new office that requires renovation or fit-out time before it can be operational.
It’s a little-known secret that for every year of a lease, the tenant is normally given at least one month rent-free. For example, a 5-year lease should provide you with a minimum of 5 months rent-free.
5. Understand Caps on Additional Charges
Many leases include additional costs, such as service charges for building maintenance, insurance and utilities. Ensure you negotiate a cap on these fees to avoid unexpected bills.
For serviced offices, make sure that all essential services are included in the price. Some landlords may pass on additional costs to tenants, so clarifying what is and isn’t included in the price is crucial.
6. Discuss Repairs & Maintenance
In most serviced offices, landlords will handle all repairs and building maintenance, but it's vital to ensure this is clearly stated in the lease.
If you’re renting a traditional office, discuss with your landlord who is responsible for internal repairs and who is responsible for external maintenance. Clarifying this upfront will avoid disputes down the line.
7. Ask If You Can Sublet
An office sublet is where a tenant who is leasing office space rents out part, or sometimes all, of the space to another tenant.
If your company needs to downsize or relocate during the lease term, having the ability to sublet part of the space could ease the financial burden. Subletting stops you from paying for unused office space. The terms of subletting should be clearly outlined in the lease agreement.
8. Ensure You Have a Right to Alter
Most organisations will require some form of customisation in their workspace. It is important to understand the lease terms regarding alterations.
Some landlords may allow partitioning or decorating, whilst others may be more restrictive. Many leases require the office to be restored to its original state at the end of the term.
9. Ensure You Use the Company Name, Not Yours, as Lessee
Avoid signing the lease under your name, where possible. Instead, have the lease drawn up under your company’s name. This will protect your personal assets and limit your liability if your organisation faces financial issues. It is essential to take this step, as signing personally can make you liable for the whole lease term.
10. Keep Away from Personal Guarantees
Similarly, landlords may ask for personal guarantees, especially if you run a smaller company or are a start-up. A personal guarantee makes you liable for unpaid rent or damages if the business defaults.
If possible, negotiate to avoid this or limit the guarantee to protect your personal finances.
11. Ensure Security of Tenure
Security of tenure refers to your right to renew the lease once it is due to expire. In some cases, leases exclude this right, so you must vacate the premises at the end of the term. If you want to rent an office long-term, ensure your lease includes security of tenure.
12. Look For Added Extras
When negotiating the lease, consider asking for additional extras, such as parking, extra meeting room use or storage space. Landlords may offer these additions to close deals, especially in competitive markets like London. These features can increase the value of your lease and improve your workplace experience.
13. Avoid Paying the Landlord’s Legal Fees
Some landlords may pass on their legal costs to the tenants. However, this is something you should try to negotiate as it also common for each party to pay for their own legal fees when negotiating leases.
14. Get Legal Advice
Always have a lawyer review your lease before signing. Leases are complex documents and it’s important that you are advised professional before signing anything, so you are fully aware of obligations by both parties. A legal expert can spot potential issues and protect your business.
Negotiating a lease for office space can be intimidating, but with careful preparation and a clear understanding of your requirements, you can find the best terms to support your business.
