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Don’t Get Caught Out

Member Kirsty Harvey who runs KTD Surveying and specialises in advising businesses on how to negotiate their property transactions gives her top tips on getting the Best from your business premises 

They say “Hindsight is a wonderful thing” but when it comes to commercial property leases it is crucial that business owners understand exactly what they are agreeing to from the outset, as not doing so can have significant financial consequences.

Businesses often rely on their accountant or solicitor without realising that a chartered surveyor is the ideal person to negotiate rents and basic lease terms.  They look at practical issues such as the condition of the property and how a service charge should be applied, and know how certain lease clauses could affect the amount of rent you pay.
Below are 5 tips that you should be aware of before agreeing lease terms.  These will ensure your property costs are as low as possible, making sure your business is sustainable.

1. NEGOTIATE THE RENT. Your rent will be used as evidence against other businesses when they have a rent review or lease renewal, and vice versa. The more that tenants negotiate the better it is for all businesses in keeping rents down. Research other rents in the locality, and look at whether your premises or your lease has any disadvantages compared with the other units. Is your sales floor split level? Is your lease longer than the standard? These are just some of the aspects that could reduce your rent.

2. RENT REVIEW: Make sure your rent review clause is realistic, and not tying you in to unreasonable increases.  Some clauses refer to hypothetical assumptions which bear little reality to the actual premises.  Whilst this might be suitable for unique properties that are difficult to value, for a standard property you don’t want to pay an inflated rent for something that isn’t actually what you occupy.

3. SERVICE CHARGE: Check what it covers, and whether you will benefit from those services. If not challenge it. Is the building already in a poor condition? If so, negotiate a cap on the service charge provision. 

4. REPAIR COSTS: You may be taking on responsibility for putting the property into good repair and this could include major works, such as repairing the roof. Ask the landlord to do repairs before you take occupation, and agree a Schedule of Condition which will reduce your liability.
  
5. BREAK CLAUSES: Many tenants agree break clauses in their leases, but certain conditions attached to the clause could prevent you breaking the lease. Make sure that you get expert advice to minimise those conditions and prevent you being tripped up.