Leasing a hall, warehouse, or retail space – what to negotiate before you sign
A lease for industrial or retail premises is signed once and lived with for five to ten years. The most expensive terms are not in the rent, but in who pays for fit-out works, on what conditions the tenant may leave early, and what happens if the building is sold. This article sets out what to negotiate before signing.
Key takeaways
Decision-making framework: what you are actually buying
With commercial premises, you are not buying square metres, but operational certainty for the period during which production, a warehouse, or a retail store will run in the space. The framework has three axes, and each is negotiated differently.
The first axis is the term. A fixed term provides certainty and usually better rent, but it closes the door to an earlier exit; an indefinite term offers flexibility, but the landlord will not usually allow investment in fitting out the premises. A practical solution is a fixed term with an option to renew and with negotiated exits for defined situations.
The second axis is the investment in the premises. The more you customise the space, the weaker your position is when negotiating an extension. A tenant who installs their own technology in the hall and has no option to renew is, in five years, negotiating with someone who knows that leaving is more expensive for the tenant than increased rent.
The third axis is the suitability of the premises for your activities: approval status, hygiene and fire safety requirements, utility connection capacity, and the possibility of installing technology. Often, the premises formally comply, but a specific operation requires a change—and whoever raises this issue after signing pays for it themselves; more details in the article The Building Authority in your business: inspections of premises and changes of use.
A step-by-step procedure
Negotiations begin before the first draft of the contract arrives.
The first step is to check the property and the landlord: the land register, liens, notes, insolvency, and the owner's financial status. For industrial halls, the owner is often a special purpose vehicle (SPV) with a single asset and bank financing, which limits what they can agree to in the contract.
The second step is to describe the purpose of the lease as specifically as possible: "storage and light assembly" provides different room for manoeuvre than just "storage". The purpose also determines when you can leave—the loss of the premises' suitability for the activity is a statutory reason for termination under Czech legislation.
The third step is to negotiate the total price, not just the rent: service charge advances and their settlement method, share of common areas, indexation, costs of technological modifications, and a reserve for returning the premises to their original state.
The fourth step is to resolve modifications to the premises in writing: a list of modifications, who pays for them, who removes them at the end of the lease, and how any appreciation in value will be settled. For production halls, millions can be at stake here. We cover the practical implementation of modifications in the article Modifications to offices and non-residential premises by the tenant.
The fifth step is an option to renew with a rent-setting mechanism. A functional mechanism is a described procedure, not an agreement to agree: rent based on an index, or based on an appraisal by two valuers.
The sixth step is to define exit scenarios: cessation of activities in the location, loss of a key customer, but also the right to sublet the premises to a group company. Under Section 2215 of the Czech Civil Code, subletting without the landlord's consent is considered a gross breach of the tenant's duties, so the right to sublet is negotiated in advance.
The seventh step is the handover protocol: photographic documentation, a record of the functionality of technologies, utility meter readings, and a list of defects. Without a handover protocol, the tenant has no way to prove years later what was already damaged upon moving in, and the repair costs are deducted from their security deposit.
What is standard on the market and what is a warning sign
For halls and warehouses, the standard is a fixed term of several years with one or two renewal options, guaranteed premises parameters (floor load capacity, clear height, number of gates), and rent indexed annually. The landlord is responsible for the structure and envelope of the building, and the tenant for what they have brought into the premises. It is worthwhile to state the parameters numerically in the contract, not just in the offer sheet—otherwise, they cannot be claimed as a defect later.
For retail stores, the standard is a contribution to a marketing fund, opening hours for the entire building, and a security deposit equal to several months' rent—which is more advantageous for the tenant as a bank guarantee than as a cash deposit.
There are three warning signs. The first is indexation without an upper cap on a ten-year lease—an unlimited cost risk for the tenant. The second is the landlord's unilateral right to move the tenant to another part of the building: a technical detail in the draft, but a loss of revenue for a retail store.
The third sign is a contract without service charge settlement: advances without an obligation to settle are just rent under a different name. A missing provision on the VAT regime falls into the same category. The lease of immovable property is generally exempt under Section 56a of the Czech VAT Act, but for a lease to another VAT payer for their economic activity, the landlord can opt to tax the rent. An unclear regime therefore changes cash flow and, for a tenant without a full right to deduct, also the actual cost of the rent; we discuss it in the article VAT on property leases.
Where the legal line is drawn
Under Czech legislation, tenants of commercial premises have several tools that companies are often unaware of. Before you read them as a guarantee, bear one thing in mind: the entire special regulation for the lease of premises for business purposes is dispositive, so the rules below are only the statutory default regime from which the contract can deviate. In a review of a termination notice, the Czech Supreme Court confirmed this in judgment 26 Cdo 2585/2019—the parties can agree on different time limits, a different form of objections, or exclude the objection procedure altogether.
Modifications to the premises have a clear rule. According to Section 2220 of the Czech Civil Code, a tenant may only make changes to the property with the prior consent of the landlord, and if the contract was in writing, the consent must also be in writing. The change is made at the tenant's own expense, and upon termination of the lease, the parties will settle according to the degree of appreciation. Without consent, the tenant must restore the premises to their original state as soon as the landlord requests it, at the latest upon termination of the lease; if they fail to do so upon request, the landlord may terminate the lease without a notice period.
For a fixed-term lease, the tenant has statutory grounds for termination under Czech legislation. According to Section 2308 of the Czech Civil Code, the tenant can terminate even before the term expires if they lose the capacity for the activity for which the premises are intended, if the premises cease to be suitable for this activity for objective reasons and the landlord does not provide a substitute, or if the landlord grossly breaches their obligations.
Conversely, the landlord also has the right to terminate: according to Section 2309 of the Czech Civil Code, this applies if the property is to be demolished or reconstructed in a way that prevents the use of the premises and the landlord did not have to or could not have foreseen this, or if the tenant grossly breaches their obligations—especially if they are more than a month in arrears with payments. For these terminations of a fixed-term lease, Section 2310 requires the reason to be stated in the notice, otherwise it is invalid, and the notice period is three months. For an indefinite-term lease, Section 2312 sets a six-month notice period, or three months for a serious reason—but if the lease has lasted for more than five years and the other party could not have anticipated the termination given the circumstances, the notice period is always six months.
A termination can be challenged, but in two steps and with two deadlines. Under Section 2314 of the Czech Civil Code, the terminated party has one month from the delivery of the notice to raise written objections; if they fail to do so in time, the right to request a review of the termination expires. If they are raised in time and the terminating party does not withdraw the notice within one month of their delivery, another two-month period begins for filing a lawsuit with the court. Missing the second deadline is just as fatal as the first: where Section 2314 applies, the fulfilment of the grounds for termination cannot even be assessed as a preliminary question in another dispute. Conversely, if the contract excludes its application, the tenant is not bound by any deadline and can challenge the reason for termination at any time.
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A retail store tenant also has a tool that is rarely used in practice. Under Section 2315 of the Czech Civil Code, in the event of termination by the landlord, the tenant has the right to compensation for the advantage that the landlord or a new tenant gained by taking over the customer base built by the terminated tenant—this does not apply if the termination was due to a gross breach of duties.
However, the claim does not arise automatically. The Czech Supreme Court in judgment 26 Cdo 235/2026 concluded that the customer base is linked specifically to the business in the leased premises and consists of customers who repeatedly return to it; therefore, the premises must be accessible to customers. For offices and warehouses, where there is no or only occasional contact with customers, compensation is generally out of the question—just as it is where the clientele is tied more to the person of the tenant than to the location.
The last point concerns the sale of the property. According to Section 2221 of the Czech Civil Code, the rights and obligations from the lease pass to the new owner, but arrangements regarding the landlord's obligations that are not stipulated by law are not binding on the acquirer if they were not aware of them. A negotiated contribution to modifications or a rent discount should therefore be included in the contract so that the buyer is aware of them.
Potential problems | How ARROWS can help (consultation@arws.cz) |
|---|---|
Modifications without written consent: risk of having to return the premises to their original state at your own expense | We will prepare the consent for modifications and the settlement of appreciation. For an ongoing lease, we will negotiate an addendum |
Missing renewal option: after investing in the premises, you negotiate from a weaker position | We will negotiate an option with a rent-setting mechanism, including a rule for resolving conflicting appraisals |
Termination by the landlord: deadlines for objections and lawsuits are running and the company overlooks them | We will file objections and secure a judicial review of the termination. We also handle substitute premises and relocation costs |
Sale of the property: the new owner refuses to honour agreements made by the previous landlord | We will set up the contract so that the arrangements are also binding on the acquirer. In the event of a sale, we will check whether the obligation has passed to the acquirer, and where it has not, we will assert the claim against the original landlord |
Unsuitable premises: operations cannot start due to approval status or utility connection capacity | We will verify the suitability of the premises before signing. For a lease under negotiation, we will negotiate an exit without penalty |
Final summary
A lease for commercial premises is negotiated from the end of its life cycle. First, calculate what an exit will cost you: removing modifications, relocating technology, new premises, and loss of customers. Only then should you negotiate the rent.
Czech law helps tenants more than companies realise, but only those who react in time—and only to the extent the contract allows. A termination notice for a fixed-term lease without a stated reason is invalid, there is one month for objections and another two months for a lawsuit, and a retail store tenant may be entitled to compensation for their customer base if they can prove they built it in that specific location. The ARROWS law firm is insured for professional liability up to a limit of CZK 350,000,000 and negotiates lease agreements as part of its Real Estate Law service. Write to us at consultation@arws.cz.