Here is our list of the top 10 less obvious things which people forget when renting a commercial property:
- Rates – the Government charges all commercial tenants’ business rates on properties they rent (think of it as Council Tax for commercial property). They are typically around 50% of the rent charged. A full list of rateable values can be found here.
- VAT – most commercial landlords charge VAT on any rent and service charge payable. This means you need to find an additional 20% in the short term until you can claim it back.
- Insurance – in addition to landlords’ building insurance which is normally charged on top of the rent, tenants ordinarily also need to pay for a whole host of other types of cover, such as contents insurance, public liability insurance and directors & officers insurance. It can add up, especially if there have been historic claims on the building for issues such as flooding or subsidence.
- Repairing Obligations – there are a number of different types of lease, but most require the tenant to keep the building in fair repair and condition. This often means repairing the roof if it leaks, or even fixing structural defects. It usually also means that the building will need to be put back into a good condition when you come to leave (see ‘Dilapidations’ below).
- Out of Hours Access – a lot of buildings have restrictive hours of access. That can be fine, but isn’t always convenient. It’s worth checking whether you can get in on the weekend, just in case you leave your passport in the office before you go on holiday.
- Legal Fees – most landlords insist on a long ‘legalese’ lease to be signed. Often this requires a lawyer to get involved, the cost of which can quickly escalate if negotiations are protracted.
- Service Charge – many multi-tenanted buildings have service charges in place for general building maintenance. However, these are often highly variable and can cover doing repairs to rectify issues which occurred before you moved in. It’s important to check what you may be liable for and when. Read more about the different costs in our blog.
- Small Print – it’s important to read the lease in detail, especially if a lawyer isn’t involved. Leases are often old fashioned and not particularly easy to navigate, so it can be easy to sign up to something you later regret. AT Industrials we have streamlined this process and created Smart lease, which is a three page document which is in plain english and can be processed without the need of legal aid.
- Dilapidations – the majority of commercial leases require the tenant to put the building back into a good condition when they leave. These can be very expensive, and in some instances involve putting the building into better condition than when the lease was signed. See our separate blog on dilapidations here.
10. Talk to the Neighbours – you can learn a lot about your new landlord from asking around. Knock on some doors and do your research.