A landlord and a tenant generally have opposing objectives when negotiating a new commercial lease.

A landlord usually seeks the highest rent achievable, plus the tenant paying all costs for running the building. Conversely, a tenant usually prefers the lowest possible rent, plus the landlord covering costs for running the building.

Inevitably there is a compromise between competing requirements of landlord and tenant, or there is no lease.

Present market conditions favour a tenant, meaning landlords are willing to accept less rent and more costs, in order to obtain a good tenant. If a tenant can secure a good long-term deal now, that tenant may be in good shape when space becomes expensive again.

Both landlord and tenant usually wish to ensure that buildings are properly maintained and insured. However, the shorter a tenant's lease period, the less interest a tenant has in such matters and the less willing a tenant may be to contribute.

Buildings insurance is unlikely to cover the tenant's own belongings and so a tenant should arrange separate insurance for its own items.

As a tenant has exclusive occupation and control of part of a building, the tenant is usually responsible for damage to that part unless damage is by an insured risk. A tenant should therefore ensure that there is no tenant liability for damage when caused by an insured risk. A landlord should not be entitled to the cost of repairing damage both from a tenant and insurer.

If there is common space in a building the tenant and its guests need to use the space and expect it to be suitably maintained. Maintenance is at someone's expense. A low maintenance charge can result in inferior maintenance and services. There should be a happy medium.

A landlord should not be liable to a tenant for matters beyond reasonable control, such as interruptions to electricity supplied by BELCO. A tenant requires restoration as soon as possible. A compromise may be for the landlord to use reasonable efforts to seek restoration of services. A tenant should expect a landlord to be reasonably compensated for making such efforts.

A tenant should carefully read any lease offered, to ascertain any potential future expense. A tenant may be concerned about the obvious e.g. interest being charged on late rent, without considering, for example, redecoration liabilities at the end of the lease period.

A tenant is likely to wish to avoid redecoration costs at the end of the rental period. Such redecoration may also mean that the tenant is unable to use space during a redecoration period. Conversely, putting space back into a marketable condition and the time required to do so after a tenant has left, has a cost and is potential lost rent for a landlord.

A compromise may see a tenant required to leave the space in good condition, fair wear and tear excluded. This raises the issue, at the end of the rental period, of what constitutes "fair wear and tear".

Commercial leases are not based on a standard form or agreement. A lease tends to be customised to a building and a landlord's past experience of tenants. Traditionally, landlords have tried to keep lease wording the same for all tenants of a building.

Tenants are aware that such leases were written when rental market conditions favoured landlords. There are ways for an innovative landlord to allow building lease alterations, without substantive change to the intent of the building lease. Often, small alterations such as a requirement that a landlord's decisions be "reasonable" are all that a tenant requires to sign up for the offered space.

A lawyer expert in the area can often assist a landlord or a tenant who have reached a price deal, but can't agree the lease wording, to reach a satisfactory compromise that satisfies both landlord and tenant objectives.

Originally published in The Royal Gazette, November 2013

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.