Detailed below are common questions asked regarding non-contentious landlord and tenant issues. For contentious landlord and tenant FAQs click here.
Why should I rent rather than buy?
There are pros and cons to both renting and buying commercial property. You need to make a decision based on your business circumstances. It is often better for businesses starting out to rent, as it will tie up less capital, reduce your borrowings and give you more flexibility.
How long should I take a commercial lease for?
A standard commercial lease used to last for 25 years, but many leases now are between 5 and 15 years. You may be able to negotiate a shorter period if that will suit your circumstances better. Consider asking the landlord for a break clause to give you the option to end the lease earlier. You also have the option to sell the lease if you no longer require the property.
If we take a short lease do we have to move premises at the end of the lease period?
Usually, no. As a business tenant you are entitled to obtain a new lease once your lease period is ended, under the same terms as your old one (except for the rent, which will be revised according to current market values.) In fact your tenancy continues automatically after the lease period until either you or your landlord serves notice. The landlord does have the right to refuse you a new lease under certain circumstances (eg plans to redevelop the property or occupy the building himself,) but he has to compensate you. However, if you take a lease that is "contracted out", you lose your legal right to a new lease on the same terms when your current one ends, without statutory compensation.
Where do I get advice about the terms of the lease?
You should get legal advice from a solicitor specialising in commercial property before committing yourself to a commercial lease. They will explain exactly what the terms of the lease commit you to, point out any potential pitfalls, and negotiate with the landlord to obtain terms and conditions that suit your needs and circumstances better. It is important for your solicitor to have a full understanding of your current and future business plans so that they can make sure the terms of the lease will be appropriate for your needs.
What are the costs of buying or renting a commercial property?
In addition to your rent, or the purchase price of the property, you will need to pay:
- Legal fees
- Cost of local authority searches and enquiries
- Registration fees (possibly)
- Service charges (possibly)
- Stamp Duty Land Tax (possibly)
- Business charge to the local authority
Are premiums still sometimes paid when taking over an existing lease?
Yes. The premium usually reflects a benefit you are obtaining when you take over a lease from an existing tenant e.g. a fixed rent which is below current market value, or a property that's been newly refurbished or improved.
Who will be responsible for repairs, maintenance and insurance?
If you are the only occupier of the property, you will usually be liable for structural repairs, maintenance and redecoration, and insurance. If the property is occupied by a number of tenants, the landlord usually takes responsibility for repairs, maintenance and insurance, but will charge the tenants a service charge. This is an area where you must be careful to avoid costly liabilities for repairs or even replacement of fixtures and fittings. Your solicitor will need to check the terms of the lease carefully, and you may want to negotiate better terms for yourself eg a cap on the service charge.
Will we be able to make alterations to the property?
You will probably be able to make non structural changes with the landlord's permission. You may be required to change the premises back to their original condition at the end of the lease.
Do I need to pay VAT on rent?
It's up to the landlord whether he charges VAT on rent. If you are not VAT registered then this will be a big cost that you cannot reclaim.
Do I need a survey when renting a commercial property?
We recommend that you have a survey before renting property as you may be liable for repairs either directly or through the landlord's service charge. A survey may also identify issues about the property that may affect your decision to rent.
How often should the rent be reviewed?
In theory, your rent is fixed within the terms of your lease. However, depending on changes in the market and the general state of the economy, you or your landlord may wish to review it. The lease may have a rent review built into it. Otherwise the landlord may have to end your lease to be able to renew it again with a different rent. You should take advice from an independent valuer to establish a new, fair rent.