As a small business owner or entrepreneur, finding the perfect location for your business is a crucial part of your success. Whether you’re setting up shop in a bustling city or a quiet suburban town, finding the right commercial space can make all the difference. But before you sign on the dotted line of your commercial lease, there is one important aspect that you should consider – the break clause.
A break clause is a provision in a commercial lease that allows either the landlord or the tenant to terminate the lease early, usually after a specific period of time. This allows both parties to have some flexibility in case of unforeseen circumstances or changes in their business plans. And for small businesses, having a break clause can be a vital lifeline.
Jonathan Hand, founder of The Lease Negotiator, knows all too well the importance of a break clause for small businesses. With over 20 years of experience in commercial property, he has helped numerous small businesses and SMEs navigate the complexities of commercial leases.
“The break clause is often overlooked by small businesses, but it’s a crucial aspect of a commercial lease,” says Hand. “It gives small business owners some flexibility and protection in case things don’t go as planned.”
One of the main benefits of a break clause is the ability to end the lease early without incurring any penalties. This can be particularly helpful for small businesses that are just starting out and may not have a steady stream of revenue. In the unpredictable world of business, having the option to terminate the lease can save a small business from financial troubles.
Moreover, a break clause can also provide small businesses with the opportunity to negotiate better terms for their lease renewal. Hand explains, “If a business has been doing well, they may want to expand or move to a larger space. Having a break clause gives them the option to renegotiate the lease and potentially get a better deal.”
On the other hand, if the business is not doing as well as expected, the break clause can serve as an exit strategy. This is especially important for businesses that have signed a long-term lease and are struggling to keep up with the rent. Hand adds, “It’s better to have the option to terminate the lease and start fresh somewhere else rather than being stuck in a long-term lease that is not sustainable for the business.”
But having a break clause is not just beneficial for small businesses. Landlords also benefit from including a break clause in their leases. It provides them with the opportunity to review the terms of the lease and potentially increase the rent in line with market rates. Additionally, it also allows landlords to have some control over when their property is vacated, giving them time to find new tenants.
In the UK, the length of a break clause can vary depending on the type of lease. For example, a fixed-term lease may have a break clause after a specific number of years, while a rolling lease may have a break clause that can be activated after giving a certain notice period. It’s important for small business owners to carefully review their lease and negotiate an appropriate break clause that works for their business.
Hand advises, “Before signing a commercial lease, small business owners should seek professional advice to make sure they fully understand the terms and have a break clause that provides them with the flexibility they need.”
In conclusion, a break clause is an essential aspect of a commercial lease, especially for small businesses. It provides them with the necessary flexibility and protection in case of unforeseen circumstances. For small business owners, it’s important to carefully review and negotiate a break clause that works in their favor. And for landlords, including a break clause can benefit both parties in the long run.
So, before you sign your next commercial lease, make sure to consider the importance of a break clause. It could be the key to your small business’s success.
