Checking a commercial tenant's solvency before signing

Rent is not the principal measure of security

Investors often see an attractive rent over a long term and consider the matter settled. That is a mistake: a contractual figure guarantees nothing without a tenant capable of paying it for years. Solvency checking is a separate due diligence stage that must precede signing. The longer the lease, the more important the tenant's resilience throughout the term becomes, rather than merely its position on the signing date.

Financial history, not just a personal guarantee

A personal guarantee may prove difficult to enforce. The tenant's actual trading history and financial resilience matter more: how long the business has operated, with what results, and whether it has experience renting similar space elsewhere. A guarantor without verifiable assets or transparent accounts is effectively a decorative clause rather than real protection against non-payment.

The business determines the premises' requirements

The proposed activity determines which business licence the premises need. A mismatch between the stated activity and the property's actual capabilities causes delays and disputes after signing if unchecked beforehand. Checking early saves more than time: where a particular use requires separate approval, include that process in the transaction timetable rather than resolving it retrospectively.

Security beyond a signature

Real protection comes from the security supporting the tenant: a deposit above the statutory minimum, an additional bank guarantee (aval), or a personal guarantor with verified solvency. Without it, the contract largely relies on the tenant's good faith without protection if circumstances deteriorate. The amount and form should match the risk. A longer lease and less transparent financial history provide stronger grounds for additional security beyond the minimum deposit.

What if the tenant's business fails?

For a multi-year lease, specify in advance what happens if the business closes early: assignment or subletting rights, early-termination penalties and reinstatement obligations for alterations made for the tenant's activity. Without clear terms, the owner lacks an answer to one of the most likely problem scenarios: departure before expiry. Also reserve approval rights over assignment; otherwise, the lease may pass to a third party with a very different solvency profile from the original tenant assessed.

Conclusion

Commercial-letting security rests on three things: the tenant's real ability to pay, the quality of contractual security and clear departure terms, rather than merely a signed long lease. This complements the commercial tenant strategy and should form part of baseline due diligence for the commercial strategy, rather than an optional check for cautious investors.