Heads Of Terms

When signing a lease you will, of course, need to be aware of how long it is intended to last for. No two leases are the same, but in general you can expect leases for a Retail space to start at around five years, with some retail leases often starting at 10. To a small Charity, this can seem like a nonviable commitment, so to negate this, you will want to negotiate several concessions with your landlord, when drafting your heads of terms.

A rent-free period is, as you would expect, a period of time during which it has been agreed that you do not need to pay any rent at all.

It might seem unbelievable, but there are plenty of reasons a landlord might offer a rent-free period (or periods); from giving an incentive for you to sign the lease in the first place, to compensating you for any additional works and repairs that need to be done to the property, and the loss of business this may cause you. It is vital this is negotiated in the heads of terms.

This is a clause in the lease contract which enables you (or your landlord) to end the lease early. It may be that the break clause only comes into effect after a certain amount of time (for example, three years in a five year deal) or on particular dates, or it may be that it can be exercised at any point during the lease. It is vital that a break clause is negotiated for in the heads of terms. 

If it comes to a point where the premises are no longer viable or suit your needs, it might serve you well to sublease the property to another business; again this clause should be negotiated in the heads of terms as a future proof option. 

As a long-term tenant, the amount you pay will likely be subject to rent reviews. Taking place regularly, usually every three to five years, rent reviews happen so that rent can be adjusted to match market conditions. While market levels can increase, meaning increased rent for you, they can also remain static or even fall. However, you will likely find common wording in your lease that says your rent will be reviewed “upwards only”; meaning that your rent can only increase and will never decrease, even if the market dips. This is standard practice among landlords and it is unlikely that you will be able to negotiate against it, again it is vital that this point is pushed in the heads of Terms.

Service charges cover the fees that landlords pay out to maintain the property, and then charge back to you. For example any cleaning, or maintenance and repairs to the parts of the property that are shared by multiple tenants, such as hallways, reception areas, stairwells, lifts, the building’s facade, plumbing, roofing and drains. Management charges that the landlord pays to their agents with regards to the management of the property are sometimes questionable. Watch out for issues here as some landlords make their own calculations on costs. In this case, it is possible to negotiate with your landlord for limits to be placed on how much they can ask for in service charges, once again this all needs to be covered in the initial heads of terms.