ARTICLE · 25 SEPTEMBER 2024
Short-term Leases: Common Pitfalls – A Tenant's Perspective
Short-term leases, while seemingly low-risk, can lead to financial and operational challenges if not thoroughly evaluated. Key considerations include ensuring lease terms align with future plans, understanding exit options, addressing repair obligations, and managing liabilities, including tax implications.
United KingdomReal Estate and Construction
Tenants acquiring short-term leases often perceive they
are exposed to little risk and focus on the speed of the
transaction or the overarching business acquisition. While this is
understandable, even a short-term lease could lead to significant
financial and operational challenges if overlooked.
Do the lease terms match your future plans?
Whether you are negotiating a new lease from scratch or taking
on an existing lease as part of a business acquisition, it is
important to ensure the lease terms permit your future plans and
address any mismatch early in the negotiations.
Are additional consents or variations required to make the lease
suitable for your purposes? These will need to be factored into
completion timescales. In respect of quantifiable risks, can a
reduction to the purchase price or a rent-free period be negotiated
or a warranty given for more unknown liabilities such as planning
or environmental risk factors?
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