Understanding your leasing options and the terms of agreement is vital when it comes to securing and negotiating a new office space for your business.
Commercial lease agreements are often more technical and time consuming than residential agreements. They include fewer legal protections than provided for by residential law and rules on privacy and security deposit protections do not necessarily apply.
Commercial leases also do not always conform to a standard template. They are frequently customised to suit the requirements of both the landlord and the leaseholder. This means a degree of expertise is required to read and interpret them correctly. While hiring a lawyer to assist when agreeing on a commercial lease is not mandatory, it is prudent to have a have an expert advisor, such as JLL, to assist with the negotiation and reduces the chance of any future disputes between the landlord and your business.
Office leasing usually involves binding contracts, larger sums of money and longer terms than residential lease agreements. A detailed negotiation process is necessary, often incorporating special terms for both business and landlord.
As part of the negotiation process, you need to think about the lease term, the cost, the physical space and whether it requires alteration or improvement. Any renovations need to be included in your long-term business plan. Consider the minutiae of how you successfully operate your business and make sure the lease fits in with these plans.
Critical commercial lease terms include: length, security deposit, specification, subleasing, renewal options and termination clauses.
If a central location is key to your business, you should budget for higher rents. Take time to evaluate whether you have chosen the most cost-effective location for your business needs. If customers come on foot, or drive, the location must be easily accessible. Does the location match up with the needs of your customers and your budget? The right lease for you will combine all of these elements.
Having a well-prepared commercial lease agreement is important for both parties as it clearly outlines the rights and responsibilities of the tenant and landlord. It rules out the ambiguity and misunderstandings which can lead to disputes.
Types of landlord
There are generally three kinds of Landlord – a “Portfolio Landlord” a “Single Ownership Landlord” or a “Strata-title Landlord”. Portfolio landlords generally own a variety of properties and will likely conduct all services in-house.. Single ownership landlords tend to be individuals or institutions that are likely to own the entire asset. They often contract out buildings management to others. Strata title landlords may own a particular floor or space within a building. They too are likely to leave buildings management to others. Each landlord type will have a differing investment strategy – professional advisors such as JLL Property will be able to assist you in choosing the correct landlord to your business needs in Hong Kong.