As a technical industry that relies on employee expertise and studio space, architecture services businesses and architect studios often enter into commercial leases to expand their business. If you are a studio manager of an architectural business, you should ensure that you have an in-depth knowledge of the key areas within a commercial lease before you consider signing a contract. These key clauses include the review of rent and the term of the lease – both explored in this article.
Rent Review for Architecture Studios
Rent review can have a significant impact for any studio business owner as it can potentially throw your business into turmoil should it increase more than envisaged. There are some ways in which you can limit its effect upon your business. Firstly, rent review only occurs in commercial lease each 2, 2 ½ or 3 years, which will provide you with plenty of time to prepare for this situation. Also, you could consider attaching the rent increase to a market index such as the CPI (Consumer Price Index) if you wanted absolute certainty as to the price of the rent increase.
Furthermore, you should consider that the owner of the commercial property could include a ‘ratchet clause,’ which is a clause stating that the rent cannot be reduced below the existing rent. Although this may sound unfair, it is a relatively standard clause. Moreover, before entering into a commercial lease, you should ensure that there are objective mechanisms to determine how the rent should be reviewed. This could be done using the CPI or inflation or any other factor that you believe to be fair and reasonable for your architecture business.
Term of Commercial Leases for Architects
The term of the commercial lease that you enter into on behalf of your architect business can be critical as any misunderstanding or miswording of any of the terms could set your business back substantially. First and foremost, the commencement date of the lease should be clear and concise. For example, the lease should state that you are to move on either ‘on x date’ or ‘after x date.’ The date of termination must also be equally clear and concise. Building services studios and engineering consultants are increasingly offering vertically integrated services. This change in the industry adds external pressure for architects to offer competitive services. By ensuring certainty of the term of a commercial lease, this can be one less issue to be concerned about as a business owner.
In addition to commercial lease premises, architect businesses and studios also often lease specialist CAD hardware and document preparation equipment. If you need to fit out your architect studio, ensure your lease has a fit-out clause. If you are looking to start your own architect business or expand your already existing architect business, you should begin to consider the legal considerations that are intrinsic to entering into a commercial lease. Our commercial leasing lawyers have experience in all property law matters, including conveyancing and retail leasing. We can also assist in employment law matters applicable for architectural services businesses such as contractor agreements for architects.