It can be hard to know what commercial lease suits your business best. Committing to a short-term or long-term lease ties you into a legal contract, which means you’ll need to pay the associated rent over time. For that reason, we’ll look at short-term leases with their advantages and disadvantages.
What is a short-term commercial lease?
A short-term commercial property lease is a rental agreement which lets tenants rent business premises for a short time. Often these lease agreements last between one and five years only.
Since they are shorter, these leases give the business owner greater flexibility and provide fewer obligations to maintain the premises and lower the land tax they need to pay. If the premises are leased at market rent (without premiums), they can be a cheaper alternative to a long-term lease.
What is the difference between a long and short commercial tenancy agreement?
A short-term commercial lease only includes basic terms and conditions for the commercial landlord and tenant. This is quite different to longer-term leases, which naturally include further requirements to maintain the premises for longer, and often include many more specific clauses. longer-term leases can also be revised and adjusted over time to suit the needs of a business as it changes.
It’s best to select whichever one suits your requirements. For example, a short-term commercial lease may fit well with newer or higher-risk business ventures. It would also suit a business opening a franchise in a new location where success is uncertain. On the other hand, a long-term lease would suit more complicated arrangements where multiple clauses can be added to the contract, and it can be adjusted over time.
What are a landlord’s responsibilities in a Short commercial tenancy agreement?
There are several responsibilities that landlords have towards tenants.
The landlord must outline how the tenant can use the property, alongside any necessary restrictions. They must also maintain the building and carry out essential maintenance tasks on the property’s grounds. This also means they must purchase property insurance.
Likewise, they need to ensure the building meets the correct health and safety standards. Landlords are also responsible for collecting rent, much like a residential landlord, and then passing the necessary amount to their mortgage lender.
What are a tenant’s responsibilities in a short commercial tenancy agreement?
Commercial tenants also have several responsibilities outlined within the lease.
Usually, tenants pay the landlord a portion of the utilities costs alongside rent for the property. Depending upon the agreement, they may also be responsible for some property taxes. Tenants must also do minor maintenance to keep the property in good condition (e.g. routine cleaning or repainting a room).
What are the lease terms for commercial letting agreements?
Lease terms are variable. There are three different types of commercial lease terms to accommodate different landlord/tenant situations, including:
- Fixed-Term: fixed-term leases exist for a pre-agreed amount of time, ending after this time has elapsed. These leases can vary in length and be renewed if the landlord and tenant desire to do so.
- Fixed Period (weeks, months or years): similar to a fixed-term agreement, this lease continues for a set period. However, the difference is that it is set to end without the tenant or landlord’s notice. Under this agreement, neither party needs to give notice to end the lease; it simply ends by itself. Once again, the landlord and tenant can choose to renew the agreement or continue it from month to month.
- Periodic Leases: periodic leases keep on going until the tenant or landlord chooses to give notice. These agreements are ideal for businesses that choose to occupy premises for the long term.
Ultimately, you should choose the lease which suits your business best. A short-term commercial lease for property allows you to run your business more flexibly and for shorter periods of time than other alternatives.