Office Leases: The Tenant Landlord Relationship

Communication and negotiation is central to any functional relationship and, once an office space is occupied, this should hold true between landlords and tenants. Before a lease is signed, would-be occupiers need to secure favourable terms and a contract that works in the long term.

Unlike in the residential world, there is more variation in commercial leases with real scope for negotiation. Landlords tend to have commercial conveyancing experience on their side and will be well-represented by agents and solicitors. Landlords relish an unrepresented tenant, so companies need an agent or an in-house expert that can advise on the technical, financial, legal and market issues throughout the entire process.

Good cop, bad Cop

Like any good cop / bad cop scenario, agents act as a buffer in tricky discussions, and become an intermediary that can take any emotion or reaction out of negotiations, helping support a more successful long-term relationship between occupier and landlord. A tenant rep will only focus on the tenant. There’s no conflict of interest as they don’t represent landlords and have no vested interest in whether a property is taken, or in keeping rent levels high.

The technical and legal process

We have seen many companies try their hand at agreeing Heads of Terms and the 10 or so required legal documents with their prospective landlord. Often this approach is a false economy – good lease negotiation experience will save tenants money on their new office because they will be paying the right rent and will receive more substantial incentives.

It’s also important to be realistic about allowing the time required from initial office search to moving-in. Finding a new office can be a longer process than many anticipate, and unrepresented tenants may feel pressure to rush the negotiation stage with a landlord. Remember, it’s a huge commitment and one that a tenant is bound to for a number of years, so it’s important to get it absolutely right. Often companies think too short term, focusing discussions on rent-free periods, repairs, alterations; and service charges. These are all valid and important, but they must also take a longer view and look closely at provisions for break clauses, rent reviews, dilapidations and so on.

Getting the right expertise on your side

Our client, Puzzle, recently said:  “Novum Office helped us to make the massive leap into the unknown world of demises and superior landlords, making the legal minefield much more comprehendible for us! I have no doubt that we would have we made some costly mistakes without their advice”.

Remember, acquiring a lease can be a huge commitment with significant financial and structural obligations. You need the expertise on your side to navigate the technical and legal process for you, ensuring you are never left exposed and negotiating on your behalf to prevent costly mistakes.