A commercial lease is usually the largest fixed commitment a small business signs. The clauses that cause problems are rarely the rent.
The basics
- Full details of landlord and tenant
- Description of the premises
- Lease period and renewal terms
- Rent, escalation rate and payment date
- Deposit amount and conditions for return
- Permitted use of the premises
- Who is responsible for which repairs
- Termination and breach provisions
Where the money actually is
Escalation
An annual escalation compounds. Over a five-year lease, a high escalation on a rent that seemed affordable becomes a rent that is not. Calculate the final year before you sign, not the first.
Operating costs
Rates, levies, utilities and common area charges may sit on top of rent. Establish what is included and what is billed separately, because the difference can be substantial.
Repairs
Leases often make the tenant responsible for far more than expected, sometimes including structural elements. Read this clause carefully.
Reinstatement
You may be required to restore the premises to their original condition at the end of the lease. If you fit out the space, that cost lands at the end.
Commercial landlords routinely require directors to sign personal surety. That makes you personally liable for the full lease term even if the company fails.
Understand what you are signing. It is the clause most likely to follow you personally.
Getting out early
Commercial leases generally do not include a right to cancel early. Where a break clause exists, it will be conditional. Where it does not, you remain liable for the balance of the term.
Cession or subletting may be permitted with landlord consent. Check whether that consent can be unreasonably withheld.
Before signing
- Calculate total cost over the full term including escalation
- Confirm what operating costs are additional
- Photograph the condition of the premises on the day you take occupation
- Confirm the permitted use covers what you actually do
- Have a long lease or a high-value one reviewed by an attorney
Need the document itself?
94 South African legal and HR documents, drafted from your details and emailed in minutes. From R99, no attorney fees.
General information, not legal advice. Lightbizhub is not a law firm. For complex, disputed or high-value matters, have any document reviewed by an admitted attorney before you rely on it.