Issues to consider before leasing business premises

A man holds a copy of a title deed. FILE PHOTO | NMG

A business premises is the physical location that houses your business. With the growth of e-commerce, there is an option for businesses today to operate without physical premises through an online presence.

However, many businesses still prefer to have a physical location. Some are required by law to have a physical location, while others have the preference due to reputation and perception.

The most common practice is to enter into a lease arrangement for the business. A lease is an arrangement where you have access to the premises owned by the landlord in exchange for a periodic payment. This payment is often monthly or quarterly.

You ought to consider several issues before you get into a lease arrangement.

The first is to do a thorough due diligence of the property to ascertain ownership of the premises and capacity to transact. It is essential to do due diligence on the landlord to avoid a situation where you would be classified as an unlawful tenant. Such a situation can arise where one enters into a lease with a fraudster pretending to be the owner of the premises.

You also need to check the permitted use of the land. This is often indicated on the face of the title. The common types include residential or commercial. While checking for the use, make sure that the title allows office use if for commercial use and industrial use if it is a factory.

Due diligence will save you a lot as it will assist you in determining the ownership. Ask for a copy of the title deed and do an official search over the property to ascertain that the person who offers you the lease is also the owner. The search will not only reveal the ownership of the land but will also reveal if there are any other issues with the land, such as mortgages, court caveats, and so on. A mortgage on the property does not adversely affect your lease, provided that the bank has consented to lease if required.

You must then do a viewing and demarcation of the premises. For example, if you are acquiring some office space, you will need to see a floor or office plan of the area you are taking. If this is unavailable, you must ascertain the locations and size of the site you intend to lease. It is good to know in advance the term of the lease before the commencement date. How much rent shall you pay, and when shall you pay the rent?

Other than doing due diligence on the premises, you should do another on the landlord. If it is a company, find out who the directors and shareholders are to avoid dealing with shadowy persons. A simple search on the e-citizen platform will reveal the identities of the shareholders and directors. If the landlord is an individual, it is possible to verify the legitimacy of the identification document presented to avoid fraud.

The legal documentation to secure your leasehold interest includes a letter of offer that sets out the proposed lease terms and allows you to book the premises and pay a deposit.

The landlord will give you a lease that should comply with the format set out in the law. It is imperative to have your lease written down. Leases over five years should be registered against the title at the land’s office.

Ms Mputhia is the founder of C Mputhia Advocates | [email protected]

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