- Check the landlord’s title and the property’s permitted use.
- Fit-out, reinstatement and early-termination costs can outweigh the rent.
- Make sure the lease supports the registered address you need.
For an international business, a Shanghai lease is both a property document and a registration document. The address may be used for the company’s business licence, tax registration and bank account, so the lease needs to work for the business, not only for the occupation of the space.
Landlords in prime buildings often use detailed standard forms. The main commercial terms are negotiable, but the schedules and house rules can contain equally important obligations.
Before signing: property and landlord checks
- Confirm the landlord’s ownership and authority to lease the premises.
- Check whether the property is mortgaged or subject to other rights.
- Confirm the permitted use and any restrictions under the building’s approvals.
- Review the fire, fit-out and building-management requirements.
- Check that the address can be used for the intended company registration.
A lease signed with a tenant whose registration is later rejected is difficult to unwind. The registration question should be answered before the deposit is paid.
Rent, deposit and service charges
Office leases commonly separate rent from property-management fees, air-conditioning, electricity and other charges. Confirm what is included, how charges are calculated and when they can be adjusted. Deposits are usually several months’ rent and may be offset against specified liabilities only.
Currency and invoicing matter. Foreign tenants should confirm the currency of payment, the type of invoice the landlord can issue and the treatment of taxes. A rent figure that looks acceptable at the term sheet stage can look different once service charges and tax are added.
Fit-out and handover
The condition of the premises at handover, the approval process for works and the responsibility for existing installations should be documented. A schedule of condition with photographs reduces later disagreement about damage.
Fit-out periods are often linked to rent-free periods. If the landlord delays approval or the building fails to provide access, the tenant needs a clear remedy. The lease should also address responsibility for fire-safety approval and any building works required for the tenant’s use.
Term, renewal and early exit
Confirm the commencement date, rent-free period, renewal mechanism and any break option. A renewal “option” may be subject to conditions, including notice periods and updated rent. Early termination usually triggers a penalty, forfeiture of deposit or liability for the remaining term.
Assignment and subletting should be reviewed if the business may move, restructure or share space. Landlord consent is commonly required, and the conditions for consent should be clear before the tenant needs them.
Reinstatement and exit costs
Many leases require the tenant to remove fit-out and restore the premises at expiry. The cost can be significant. The tenant should establish what “reinstatement” means in practice, whether the landlord can elect to keep improvements, and how the deposit will be dealt with after handover.
Dispute and service provisions
Notice provisions, service addresses and the dispute-resolution clause deserve attention. Where the tenant is a foreign company, the lease should identify who can receive notices and how disputes will be escalated. A clause that is unworkable in practice can make a modest disagreement expensive.
A lease review is most useful before the term sheet is signed. Once the deposit is paid and the fit-out has begun, the practical options narrow considerably.