Letting Commercial Property


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Download PDF 		Do you own a commercial property you wish to let it?

Do you know how you are going to let it?

Would you like to let it without using an agent?

The Bright Property website hopes to offer you a straightforward approach to letting commercial property. The key to successfully letting is ensuring that it is marketed appropriately, which can be difficult, which is where Bright Property can help. To assist this process we have produced a step-by-step guide to the key points that are required to achieve this.

STEP 1 – CONSIDERATIONS

  • Check with your mortgage lender than you are permitted to let out the property.
  • If you rent the property you will need to check with the freeholder that you can sub let.
  • Your insurance cover may need to be increased.
  • You will be liable to pay tax on your gross income from rents.
The type of property and its condition will have an influence as to the Tenants you will attract, the rent that you will achieve and terms of the tenancy you agree. It may be advisable to ensure the premises are in good working order from the start as it's your responsibility to ensure the property is safe. Your responsibilities include:
  • Repairs to the structure and exterior of the property,
  • Heating and hot water installations, basins, sinks, baths and other sanitary installations
  • All gas appliances and systems must be safe and regularly maintained.
  • Repairing and keeping in working order the room and water heating equipment
  • Ensuring electrical appliances should be serviced, in good working order and the supply safe. It is advisable to supply Instructions for the use of all electrical items.
  • Ensuring that there is adequate Fire Protection – smoke alarms, extinguishers, signage etc.
  • Air conditioning regularly serviced and maintained.
STEP 2 - RENT & MARKETING

Rent
This will be dependant on the type property (office, industrial unit shop) location (prime, secondary, Business Park), condition, and the features (number of parking spaces, air conditioning) and what comparable properties in the vicinity are achieving. By looking in the local property pages this gives you an indication of the rental values of similar properties.

Be realistic when pricing your property, if you undervalue it you could be inundated with people looking for a bargain and then you could be disappointed when you don’t achieve the price you want. Or alternatively by overpricing you may detract potential Tenants.

Marketing
The purpose of Bright Property’s website is to give you the best tools to market your property. All you need to do is decide which package you think will be most appropriate for your property, take photographs, measure the rooms and identify the key features.

Once this information has been entered into your Bright Property advert then you are ready to go.

As soon as the board is received make sure that you put it up as apart from the website this is one of the most effective ways of potential buyers identifying your property.

STEP 3 - VIEWINGS

As soon as your advert is live, be prepared to respond to enquires quickly, as a delayed response may result in a lost Tenant.

As with most Estate Agents you will be expected to conduct the viewing. It is usually that viewings are by appointment so that you can ensure that your property is presentable and that you are available.

Things to bear in mind:
  • Be aware that you are allowing strangers into you property and therefore make the necessary provisions.
  • Think of questions that you may wish to ask your prospective Tenants such as: - What do they wish to use the property for? What length of tenancy are they looking for?
  • Demonstrate the best use of a space – i.e. remove any rubbish
  • Print off Bright Property’s online details so that you can give to potential Tenants.
  • Focus on the positive aspects of the property, i.e. excellent location, air conditioning, good useable space, parking.
  • It is worthwhile getting feedback from viewers as to what they liked disliked about the property so that you know what changes you can make, so follow up the viewing with a phone call or email.
STEP 4 – TENANTS CHECKS

It is advisable to take up prospective Tenant’s references and may give and indication as to the business’ ability to pay the rent over the period of the lease. Therefore you may wish to ask for all or some of the following:-
  • Bank Details - bank name, address, your account number, sort code, account name
  • Previous Landlords – Details of where you have lived for the last 3 years.
  • Accountant and/or Solicitor reference to verify who you are
  • Last 3 years accounts.
  • Checks with Credit reference agency may also be carried out.
    http://www.tenantverify.co.uk/
    http://www.rentchecks.com
If the Tenant is not able to provide sufficient referees or fails the reference checks you could ask the Tenant to provide a guarantor. Therefore if the Tenant business fails, the guarantor would be liable for the rent and for other payments due under the lease for the rest of the lease period. Depending on the circumstance you feel that a rent deposit would be sufficient or both a rent deposit and guarantor is necessary.

STEP 5 – LETTING A PROPERTY – THE TERMS

It is advisable to set out the basic terms that the premises are being offered in the details as a guideline to the potential Tenants. There may be an element of negotiation (such as the length of the lease) it will depend on the circumstances and the demand for the premises.

The following provides an indication of what maybe included in a Tenancy Agreement. However it maybe worth obtaining a copy of the Code of Practice for Tenants and Landlords in England and Wales to follow when negotiating commercial leases. http://www.bpf.propertymall.com/whoweare/commercialleases

Lease or Licence?
A lease creates “an interest in land” a license does not.

Key Points of a Licence:
  • The area of occupation may not be precisely defined.
  • The occupier shares some or all of the occupation, probably with the Landlord;
  • Some services are included in the licence fee – Business Rates, electricity, furniture, fixtures and fittings are included
  • The owner can terminate the occupation on little or no notice;
Key Points of a Lease:
  • There is a written agreement setting out the terms of occupation
  • The area of occupation is precisely defined;
  • The occupier enjoys exclusive occupation - it is not shared (except with other Tenants)
  • There are no services included in the money paid for occupation - but they might be stated as a separate item;
  • The money paid is for rent only.
  • The property owner cannot terminate the occupation on very short notice
  • Term
    The length of lease offered.
  • Rent
    • Will it be all Inclusive?
    • How often will it be paid – weekly, monthly, quarterly?
    • How you wish the rent to be paid – standing order, direct debit etc.
    • In advance or in arrears?
    • Is VAT payable.


  • Landlord and Tenant Act 1954
    Will the lease be within the protection of the Act if so this protects the Tenants rights when renewing your lease unless there has been a breach of Tenancy.
  • Services
    What services do the premises benefit from – gas, electricity etc
  • Shared Facilities
    Kitchen, WC, communal entrance.
  • Use
    What planning use does the premise have?
  • Alterations
    Are alterations permitted? What is the procedure in obtaining permission from the Landlord i.e. in writing, complying with Building Regulations?
  • Break Clause
    This is an option for either/both the Landlord and Tenant to terminate the lease early. The lease will specify when the break clause can be exercised, the notice period to be given and whether it is conditional i.e. the break clause cannot be exercised if the Tenant is in breach of the lease.
  • Sub-letting
    Is sublet of the premises permitted. Whole or Part? On what terms (usually the same terms as the lease but for a shorter period).
  • Assignment
    Transferring the obligation of the lease to another business and bringing the original Tenants occupation of the premises to an end. Assignment does not always bring the obligations of the lease to an end as in some circumstances the Tenant may have to act as guarantor for the Assignee. Assignment can be complex so ensure the lease is clear to prevent unnecessary negotiations if assignment does takes place.
  • Service Charges
    The actual cost for the maintenance of the communal or shared areas, i.e. entrance, we, roof. You will need to establish how the service charge is calculated, what proposition you are responsible for, whether there is any planned maintenance, and if there is a sinking fund.
  • Repairs
    It is usual for the Tenant to have some responsibility for repairs it may be:
    • Full Repairing and Insuring
      You are liable for all maintenance, repairs, and insurance of the premises.
    • Internal Repairing
      The Tenant is responsible for the interior of the premises in terms of maintenance and the Landlord is responsible for the exterior. If the premises are shared then the service charge may cover the maintenance of the exterior of the premises.


  • Rent Review
    How the new rent will be reviewed.
    • When are the rent review dates?
    • Can the rent go down, as well as up?
    • Whether it is based on market rent or linked to the Retail Price Index.
    • The date of the rent review.
    • Is time is of the essence.
    • What dispute resolution method will be used it agreement cannot be reached arbitrator or independent expert.


  • Rent Deposit
    In some circumstance a rent deposit may be required, for example a start up business. It will need to be agreed when it will be repaid. The circumstances it will not be repaid. Whether interest will be received on it.
STEP 6 -- LEGAL WORK AND SURVEYS

Legal Work
- Once the offer is accepted and negotiation concluded you are then need to advise or appoint your solicitor if you are using one. Alternatively you could purchase a ready made Tenancy Agreement http://www.lawpack.co.uk/landlord_and_tenant.asp
http://www.clickdocs.co.uk

You can find details of solicitors or conveyancers in your area by going to the Law Society Website.

http://www.lawsociety.org.uk/choosingandusing/findasolicitor.law.

Obtain quotations in writing detailing the work they will undertake and the costs involved.

Legal Process
  1. Lease and Searches
    The lease will then be drawn up by the Landlords solicitor/conveyance which sets out the main terms of the proposed agreement, including your names agreed terms and rent price. This will then be sent to the Tenant and/or their solicitor. At this stage searches will be carried out.
  2. Exchange of Contracts
    One the contract is agreed and all searches and surveys have been undertaking the contracts can be exchanged and a date agreed for exchange. At this point neither party can withdraw easily with out the possibility of incurring financial penalties.
  3. Completion
    At completion the Lease will be executed and any monies due paid. Arrangements then have to be made for collection of the keys.
STEP 7 – PRIOR TO LETTING

  • Read all meters.
  • Advise utility companies, council (Business Rates) that payment will be received from the Tenant
  • Clean and tidy the property is as clean and tidy, mow the grass etc.
  • Leave instructions for all appliances.
  • Show the Tenant where all the vital connection points for gas, water and electricity are.
  • Label stock cocks, fuses, switches in boiler, etc.
  • Provide sufficient keys for all doors, windows alarms etc. Demonstrate how to use them.
  • Provide contact telephone numbers in case of emergency.
  • Advise what to do in an emergency, fire, flood, boiler break down etc and who to contact
STEP 8 – END OF THE LEASE

Depending on the terms of your lease the occupation of the premises may cease based on one of the following:
  • Assignments
  • Break Clause
  • Expiry of the lease
Depending on the reason you may be responsible for reinstating the premises to its ‘original condition’ this may mean removing all the alterations that have been carried out. If you have had a schedule of condition survey (written or photographic or both) at the commencement of the tenancy this may eliminate any unnecessary negotiation. Your lease should set out what you are required to do.

If the lease is protected by the Landlord and Tenant Act 1954 there are mechanisms and procedures to be followed regarding renewal.






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