5 Things to Remember While Signing a Lease for Office

Khalid Khan

March 4

One of the most important mandatory requirements for setting up a business in Bahrain is having a physical address for the company. Since Bahrain is one of the most preferred foreign investor's destinations, there are several small and big companies offering office spaces for rent to the investors.

We have routinely advised and suggested clients in setting up their businesses and have also seen a lot of problems with the investors related to the office spaces for rent in Bahrain that I finally thought of writing an article covering issues which investors may face while signing a lease for office.

Here are some of those.

Full one-year advance rent. A lot of investors don't need a full-fledged office but even a virtual office. A lot of business centres are offering office spaces for rent in Bahrain, but asking one year advance.

This might not be a bad option if you can afford it, but you have to be sure the business centre you are dealing with has a good reputation and are not allocating the same addresses to others. Otherwise if in the records another company is existing at the lease address provided by you, then your company cannot be registered at that address.

Lessor is not the owner of the property. One of my clients was in the shock of his life when he went to register the address of the company via Municipality. The municipality staff asked him to explain how he has signed the lease agreement with the dead person.This could happen to you also, so always sign an agreement with reputed establishments or with someone known to you. Therefore, be sure you are signing the lease with the actual owner.

Lessor might not be cooperative. One of my clients signed a one-year lease with the business centre and paid one year rent in advance, but when he asked them to provide a certificate from Municipality, they said you can go and do it yourself. Municipality told him we need the real owner or anyone authorized by him to come here for this purpose. This kind of situation can definitely occur to you when you are paying a year's rent in advance so play smart and don't pay full payment at one time.

I always advise my clients not to pay one year rent till the address is accepted by the municipality, and the company formation work is done.

Address might already be registered with another company. This is another issue which you might encounter. The general rule is the same address cannot be allocated to more than one company unless the shareholder is the same (subject to municipality approvals). However, many people get fooled by signing an agreement for a property which is already registered with another company which not only results in the wastage of money but also wastage of time.

You might sign lease without reading it. This is one of the biggest blunders which people do. One of my clients signed a lease which doesn't give him the right to exit. I would never advise my client to sign a one-sided lease which doesn't let him exit even if the lessor is at stake. Also, in many leases, I noticed hidden surprises for the lessee. For example, one lease very smartly hides the fact that the lessee will be paying monthly EWA charges while the lessee was under the impression that EWA charges will be charged to him for one time only.

If you need an address for the company it doesn't mean that you have to agree with everything which the lessor impose on you. Recently I told one of my clients whom I assisted to set up a business not to sign the lease and agree for payment condition till the address is finally approved for the company formation purpose, and the business centre yielded to his condition and said the remaining 11 months payment will only be paid when the address will be accepted.

Therefore, it all depends on how you negotiate the deal and don't surrender to whims and fancies just because you need an address.

Tuesday, February 16

Why do you need proper guidance while setting up a company in Bahrain

The company you are setting up is the key to your success and if the very foundation is laid wrong then you might have to face big problems in future.

Sunday, February 14

How to change director of W.L.L. company in Bahrain

Procedure for Change in Directors

Wednesday, February 10

Why Do You Need a Professional to Draft Your Memorandum of Association

Anyone having a company or ever been involved in something related to companies must be well aware of the Memorandum of Association (the "MOA").

Monday, February 8

Things to remember while signing a service agreement

A lot of companies registered in Bahrain are dealing with numerous local as well as overseas clients, offering them different kinds of services, but only a few of them are diligent enough to understand that different clients have different specific requirements and needs. Therefore, a different agreement is needed every time if there are different requirements.