When Leasing a Commercial Property business tenants need to be aware of some important issues, and it is usually in a landlord’s interest to ensure that everything has been considered.
Being at the stage where a business needs to upscale by leasing a commercial property is exciting. A business has usually either grown to the point where it needs to expand, or where its existing operations need to come together under one roof.
For most tenants, finding the right property is understandably what they are most concerned with and of course, as part of doing this, they will have a budget for rent. However, if they haven’t budgeted for everything else that they will need to pay before moving in and once they have moved in, then the business could find it has trouble paying the agreed amount of rent.
It’s worthwhile for landlords to be aware of the things that their tenants will need to budget for in case a tenant has not taken this into consideration. What may not be a landlord’s problem to begin with could easily become her problem quite quickly, and by checking that the business has funds in place to remain solvent during the first few months of leasing a commercial property, the landlord will be doing both sides a favour.
Commercial property outgoings to budget for:
Stamp Duty Land Tax (SDLT)
Over a certain value threshold (e.g. over £150,000), SDLT must be paid when leasing commercial properties. This varies depending on the value of the commercial property and the term of the lease.
Land Registry fees
Leases granted for a term of 7 years or more require registration at the Land Registry. Certain other leases may also need noting at the Land Registry. Charges as of March 2017 go from £20 for applications via the government’s business gateway for properties ranging in value from £0 to £80,000 – to £910 for applications via the post for properties with a value of £1,000,001 or over. This process may also involve the drawing up of new floor plans.
As with buying a property, it is highly recommended that property searches are undertaken. As a minimum, these include a local authority search, water and drainage search and environmental search. Whether a tenant decides to make these searches is up to them, but it is highly likely that the success of their business will depend upon being able to operate (with planning permission) from the premises and the purpose of the searches would be to ensure that this would be the case.
Another tax for businesses leasing commercial property is business rates, which are used to help pay for local council services. Calculated according to the value of the property rather than the value of the business, these can add up to 40% to the cost of leasing a commercial property, although there are instances where businesses qualify for business rates relief.
Local authority services
If you are leasing a standalone property to a tenant, you can specify that they are to be responsible for things like their own waste disposal. Enlisting the local authority to assist with this will need to be something that they budget for.
Drawing up a lease
Having the lease drawn up by a specialist will also incur legal costs for most commercial property tenants. It is imperative for you to insist on a signed lease, so that you are not leaving yourself open to serious problems and liabilities – and it’s equally important for a tenant to have one in place. A lease will also allow you both to officialise the length of the lease and all conditions within the length of the lease, including: maintenance responsibilities, rental amount, deposits, leaving the lease, termination and rent reviews – to name just a few.
If it sounds as though there could be something in your standard lease that wouldn’t suit your tenant’s individual circumstances or business plans – or similarly, if there is something that they may need to add to a lease which isn’t in a standard version, then they will need to budget for doing this too.
For more information about the types of questions that a prospective commercial property tenant could ask you about leasing your property, see FAQs about leasing a commercial property.
About the author:
Catherine Angrave is a specialist commercial property solicitor who specialises in all aspects of commercial property leases across a range of industries and sectors. An Associate Solicitor, Catherine works for regional law firm Bray & Bray Solicitors, which has four offices across Leicestershire.