What issues should you bear in mind when negotiating lease terms on new retail premises? What issues should you bear in mind when negotiating lease terms on new retail premises?
When you begin negotiations with your prospective landlord, you may wish to consider some of the following issues:
- Rent Review – A lease without any review of rent would be the most favourable option but you are unlikely to successfully negotiate this in any long term lease without paying a higher than market rent at the outset.The next best alternative is a lease with an upwards and downwards rent review. Whilst some landlords are prepared to offer either way reviews, such leases are not common.
Some landlords may offer annual RPI linked reviews, which allow tenants to more accurately predict the rent after review, as well as spreading the cost of the increase over time rather than having to suffer a large increase every five years.
In shopping centre developments, landlord may suggest a turnover rent, that is a rent linked to sales. The trigger for such payments needs to be carefully considered.
- Rent Free Period – Obviously it is advantageous to negotiate as long a rent free period as possible, particularly if you intend to carry out an extensive shop fit.
- Alterations – You need to be certain that any alterations you plan are permitted under the lease. Generally tenants are obliged to reinstate any fit out works when they vacate the premises.
- Repair – Tenants usually have an obligation to put and keep the property in good repair. In a short lease, you should insist that the repairing obligation is limited to keeping the premises in the condition they are in at the date of the lease.
- Term – When agreeing how long a lease term to take, you should consider requesting a right to break, that is, a right to end the lease before the expiry of the term. This will give you maximum flexibility.
- Assignment and Subletting – You should ensure that there are no onerous restrictions on disposing of the premises. Consider also whether you need the ability to share occupation of the property with concessionaires, franchisees or group companies.
Depending on the property market at the time and your bargaining position, you could reduce your fixed overheads and improve the efficiency of your business by negotiating more favourable lease terms.
How can I ensure that my premises comply with the Disability Discrimination Act 1995?
From October 2004, service providers will be obliged to make reasonable physical adjustments to their premises in order to comply with the provisions of the Disability Discrimination Act 1995 (‘the DDA’). You are a service provider if you or your business is concerned with the provision of goods, services or facilities to the public or a section of the public. Therefore, those involved in the fashion industry who deal with the public will be classed as service providers under the DDA.
Most service providers will be asking the question what constitutes “reasonable” physical adjustments? Unfortunately, there is no hard and fast answer, but the DDA does provide a list of factors to be taken into consideration:
- How effective will making a particular change be in overcoming the difficulty that disabled customers face when accessing your services?
- How practical is it for the service provider to make the change?
- How expensive would it be to make the change?
- How much would making the change disrupt the business?
- What are the financial and other resources of the service provider?
- Is it possible for the service provider to get financial or other assistance in regards to making the change? For example, it may be possible to get a grant to assist you with the changes. The Disability Rights Commission has a pot of £11m, although some of this may go towards bringing cases against non-compliant premises. There may also be other sources of funding that you can turn to such as your local authority
When deciding what steps are reasonable to take, it is very much a question of looking at all the circumstances of your business and forming an opinion based on the considerations above. You will also need to consider how your ability to carry out alterations will be effected by Planning and Listed Building Legislation.
You may need to consult an access auditor and/or solicitor, in order to gain a definitive answer to what may be reasonably required under the DDA.