Keeping Property Costs Low - Top Ten Tips
Meeting potential clients is a great part of my job, and depending on what their property issue is, we usually discuss some or all of the tips below.  By following these you can ensure your property costs are as low as possible, making sure your business is sustainable
  1. Ask for a RENT FREE PERIOD before signing a lease.  This is common practice, and the longer the lease, usually the longer the rent free period granted.
  2. Before signing a lease, NEGOTIATE THE RENT.  Rent that you pay 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. 
  3. RENT REVIEW:  If the landlord gives you notice that he is putting the rent up, NEGOTIATE.  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. 
  4. LEASE RENEWAL:  You may be able to REDUCE YOUR RENT if you renew your lease.  Like rent reviews, you need to look at what comparable rents are, but on a lease renewal your rent can go down as well as up. 
  5. BUSINESS RATES:  Look at the possibility of appealing.  Be careful though as rates can be revised upwards as well as downwards.  Are you getting any small business rates relief you are entitled to?
  6. SERVICE CHARGE:  What does it cover, and will you benefit from those services?  If not try to get those excluded from your lease.  Is the building already in a poor condition?  If so you should agree a cap on the service charge provision.  This way you know your service charge will be a fixed maximum amount. 
  7. BUILDINGS INSURANCE:  Are you responsible for organising this or does your landlord? Has he billed you correctly?   Ensure you are only paying for the right amount as per the lease. 
  8. REPAIR COSTS:  Have you factored in costs for repairing the building?  You may be taking on responsibility for putting the property into good repair and this could include major works, such as repairing the roof.  Agree a Schedule of Condition with the lease as this limits your liability.  A small outlay could save you thousands of pounds at the end of the lease.
  9. DILAPIDATIONS:   At the end of the lease you may be served with a Schedule of Dilapidations.  Check this – does it accord with the lease provisions?   Are the costs reasonable?  A dilapidations claim can be reduced significantly, so you should always seek advice. 
  10. BREAK CLAUSES:  Many tenants agree break clauses in their leases, but they can be notoriously difficult to use to break the lease.  DON’T LET THIS HAPPEN TO YOU.  Make sure that you get expert advice on what the break clause conditions should be and get those agreed before signing the lease.
KTD Surveying have the experience to help you with your property costs.  A small outlay for professional advice will give you peace of mind and could save you thousands of pounds in future liabilities.  Contact us to find out how we can help you.
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Business Premises and Surveyors
Taking on business premises is an exciting time, but can also be daunting.  The right advice at the outset can save you costly mistakes in the future.  Most people wouldn’t think twice about using a solicitor to negotiate their lease for them, but what about a Chartered Surveyor?  Have you used one?  But why would you need someone in a hard hat using a theodolite, or the person that values your house for the mortgage?  What have they got to do with business premises?
 
  • Surveyors cover many areas, including those above, but one specialising in Landlord and Tenant work, such as rent reviews, lease renewals and property management can be invaluable to those leasing business premises.  A solicitor is essential whilst dealing with a lease renewal, but a surveyor should ideally also be appointed to work in conjunction with them.
  • Did you know that it may be possible to change the terms of the lease, or reduce the rent?
  • Has your solicitor advised you about the Lease Code and Service Charge Code, and the benefits these have for you?
  • Were you aware that if the landlord serves notice on you requesting you vacate the property (a "Section 25 notice") that you may not have to?
  • Do you understand all your obligations regarding repairing liabilities in the lease?  If you have a full repairing clause then you are responsible for carrying out all repairs necessary to the property – this could include significant items such as the roof.  Being aware of this at the outset allows you to budget accordingly, or negotiate to mitigate your liability.  You don’t want to sign up, move in and then find that two years later the roof needs replacing and it is now your responsibility.
 A surveyor is the appropriate professional to deal with a rent review, as they are experienced in valuing business premises and obtaining evidence to justify their claims, ensuring you end up with the right level of rent.

Of course the above applies if you are a tenant, but equally a surveyor can act for a landlord to ensure that the landlord’s investment is protected. 
People may wonder why they should appoint a surveyor when they can agree a deal themselves.  You use a solicitor, architect and accountant as they are specialists, so too is a surveyor.  Each has their own place.  Appointing the right professional frees up your time to allow you to concentrate on your business, and ensures you get the best possible agreement.  Don't just take our word for it, read some of our testimonials.
 
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FAQ's

Why do I have to repair the property even though it was in an awful state when I took it on?


It is likely that you have signed a “full repairing lease”, which means that you are fully liable for the repair and condition of the property.  If you agree to a lease like this, then it is irrelevant how bad a condition the property is in at the outset.  A term in the lease to “keep in repair” means that it has to be in repair in the first place, and therefore it is down to you as the tenant.  This can be avoided by getting a Schedule of Condition at the outset, so that you don’t have to put the property back into any better state of repair than it is when you took it on.  Alternatively, you could sign an “internal repairing lease” so that the landlord is responsible for the exterior and structure of the building, but he is still likely to charge for the repairs via a service charge.

How can I recoup all the costs of repairs via the service charge if my tenants have different obligations in their leases?

You can’t.  The service charge provisions will be set out in the lease, and these will specify what each tenant contributes to, and the percentage of their contribution.  If items are not covered in the service charge clause then you will not be able to recover these costs from the tenants.  The shortfall in the cost of the works will have to be met by yourself as landlord.  In future you will need to ensure that a lease is drafted to cover all the possible elements.

What is a “contracted out” lease? 

This is a lease that does not benefit from the provisions of the Landlord and Tenant Act 1954, so you do not have “security of tenure.”  At the end of the lease, if it is contracted out you have no rights to renew, and the landlord has the right to the property back when the lease expires.  This doesn’t stop you negotiating a new lease, but if the landlord doesn’t agree to the rent, or wants the property back to relet to someone else, there is nothing to stop him.  A lease which has not been contracted out gives you automatic rights of renewal, and you are in a much stronger bargaining position.

I have a rent review and my landlord says he is going to increase the rent.  Do I have to accept it?

No you don’t (in the majority of cases).  Unless it is a fixed increase provided for in your lease, there should be a rent review clause which details how the rent can be calculated.  Usually this will be by reference to open market rent; ie what would a “hypothetical tenant” pay if the unit was empty.  A rent review surveyor is the best person to negotiate this for you, as they have experience in researching and analysing rents and terms of leases.  Whilst it is unlikely that your rent will go down as most leases have an “upwards only rent review clause”, a good surveyor should be able to reduce the amount of increase the landlord was proposing, saving you money.  

What happens if I don’t reply to a rent review notice from my landlord; could the rent increase by default?

There are some leases which have a default in the rent review clause, so that the rent will be fixed at a certain level if you don’t comply with the conditions specified.  This may be replying within a certain timescale, so always seek advice as soon as you receive a rent review notice.

What do I have to do to operate my break clause?

This will depend on the conditions set out in your lease, where the break clause will usually specify what needs to be done.  However these conditions have to be complied with exactly, otherwise you may find that the break notice is deemed invalid.  If you are thinking of exercising your break option seek advice as soon as possible.

If I try and negotiate my rent won’t the landlord evict me?

You are perfectly within your rights to negotiate your rent both at rent review and lease renewal (subject to specific lease conditions).  If you have a rent review then the landlord cannot evict you, and the lease will specify how the rent is to be calculated (ie with reference to comparable rents, turnover, RPI etc).  There will usually also be a provision to refer the matter to an arbitrator or Independent Expert if the parties cannot agree.
If your lease is about to expire, and the lease is protected under the 54 Act (see above) then the rent must be negotiated.  If the rent or other terms of the lease cannot be agreed then it can be agreed by the court, and the provision for this is set out in the 1954 Act.  The landlord cannot just evict you.
If however your lease is “contracted out” and you cannot reach agreement on the lease, you have less of a bargaining position.  The landlord could evict you after the lease has ended if terms cannot be agreed.  Whilst this is unlikely, it is always best to start negotiating early in this situation to try and agree terms before the lease expiry.

What is “Zone A”?

Zone A is the first 20ft depth of a shop (with some exceptions), measuring back from the shop window/frontage.  This is considered to be the most valuable part of the shop.  20ft times the width (and deducting any areas such as stairs and columns which are not sales space) gives you the Zone A area.  It is used to calculate a rental £Zone A rate which allows you to compare properties with different sizes and layouts.


 

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