Aquiring Premises

Type of Interest

• Commerical premises are more commonly available on a lease rather than freehold. Freeholds will give the occupier freedom of control of a landlord though clearly involve raising capital to buy.
• Premises may be available on short leases from 1-2 years, through medium 5-15 years to long term 99 year leases.  Generally the long term leases are for land for development where it is common for the lease to be sold for a capital premium with a low rent thereafter.
• Business leases can carry protection of statute (including the 1954 Landlord and Tenant Act).  A solicitor should check that this protection has not been excluded.

Costs
As well as rent you will have to budget for:

• Business rates - check the Rateable Value, normally included in agents details.
• Insurance - increasingly landlords insure the premises but recharge the premiums to the tenant so check this with the agent.
• Repairs - what is the tenant expected to maintain and to what standard?  Again landlords will often undertake repairs but recharge to the tenant as a service charge along with cleaning and any other outgoings, particularly if the premises are part of a larger property.  A survey of the premises will help outline the likely maintenance issues.  Bear in mind that on terminating a lease the obligations to repair will have to be carried out or compensation paid to the landlord.
• Electricity/gas bills - where part of a larger property is there a sub-meter?  Are there previous bills for the premises which will help estimate running costs?

Suitability of Premises
As well as checking if the premises suit a tenants current needs, he needs to consider:

• Flexibility - is there scope for expansion or alteration in the future?
• Planning - does the proposed use comply with the existing permission?  For example is there a retail element which the Planning Authority may consider to be excessive?
• Health and Safety - is there a Fire Certificate, an asbestos report or water safety report on the premises. Landlords have an obligation to provide this information.

These comments are general and are not intended as a substitute for obtaining appropriate professional advice.  The advice of a professional surveyor and solicitor should always be sought prior to taking a lease or buying a freehold.  As with buying a house, check the market to see if the price and other terms are right and that there is not a better property round the corner!

For further information:
Thinking of renting - Main risks and managing the risks  (858.15 KB)
www.berwin.co.uk/commercial-lease.html