In the modern day business environment, it is essential companies become more agile in the way they conduct and operate themselves. The last decade has seen massive changes in how businesses are structured and the day to day decisions they make.

These changes also apply to their premises.

Traditionally, commercial properties would be leased on multi-year contracts with break penalties for those that walked away. With an increasingly unpredictable outlook, these agreements suit neither the landlord or the business tenant - flexible leases are now a much better solution for a whole host of reasons.

However, flexible leases can be unfamiliar territory, so we thought it would be useful to explainhow they work.

Heads of Terms

The time before a tenancy commences is the period when both the prospective tenant and the landlord can negotiate heads of terms. It is crucial that any agreement should be clear and unambiguous in order to avoid any future complications.

Flexible leases allow each party to protect their own position and end up with an agreement that takes into consideration the needs of both. Don't be afraid to represent your best interests - wrong decisions can financially break a business!

The Premises

A growing company needs premises that suits their needs now, but also in the future, as signing up for a long lease on an ill-suited property could have disastrous repercussions - the re-configuration costs can make the premises unviable.

If your income is hard to predict, go for a short lease and ensure that all issues related to the property are in the heads of terms. Here are some questions worth asking:

• Can you sublet part of the space if business drops off?

• Do you need to get the landlords consent for every change you make to the building?

• Who will pay for the initial fit-out?

Break Clauses

All break clauses should be clearly defined, and it is in your interests to have a minimum of conditions attached. The Code For Letting Business Premises In England And Wales (2007) recommends that the only conditions should be the full payment of the lease up until the break date, and that no sub-letting agreement continues beyond it.

Short term leases with an option to renew are a good way to see whether a property suits your business. This will minimise the stamp duty and tax you will pay and also avoid over-committing your company's finances.

Repairs & Dilapidations

What are your exact responsibilities regarding repairing and maintaining the premises?

These can be a hidden cost that quickly escalate over time. A survey of the property will give you a decent impression of future costs, so you can allocate budget towards them.

The premises should always be returned to the landlord in the same condition that they were leased, but avoid signing up to a contract that specifies anything else - it is the landlords responsibility to pay for any upgrades that go beyond the leased state.

With experienced landlords, things often run smoothly - we have been renting commercial property on flexible leases for a number of years, and are well versed in helping our clients achieve their goals. Get in touch if your company needs more advice on the next step to take.

— Pall Mall Estates have a wide range of low cost commercial properties across the UK.

Take a look at our available spaces here or get in touch with our experienced team here.

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