Questions to ask before taking on a Commercial Property Lease.
Deciding to take on a lease for a commercial property is a big commitment. With the average length of a conventional lease now between 3 to 5 years it’s important to ensure you have all the information you need before you make any final decisions.
The advice we have here is not legal advice, it is for information only. You can use NovaLoca’s extensive directory of commercial property companies to find the right person to give you specific advice for a property.
How much will the rent be and how often does it need to be paid?
Often commercial property rent is paid quarterly in advance but some landlords accept monthly rent payments.
Do you need to pay a deposit and if so will you get it back?
Typically a deposit will be required and the most common amount to pay is equal to at least 3 or 6 months rent. It is a separate payment to the first rent payment. You usually get back the deposit at the end of the tenancy as long as there is no damage either to the property or its contents.
What can you and can’t use the property for.
Most UK properties have their use defined by the local authority that has jurisdiction over them. Take a look at our blog posts covering the different class types.
Can you renew the lease? Are you allowed to end it before the agreed date?
In England and Wales most tenants will have an automatic right to renew their lease on similar terms to the original lease. A break clause in a lease gives the tenant and the landlord an option to end the tenancy early. It can either be enabled on a specific date or may be used at any time although often after a set period of time has passed. It usually requires the tenant to have paid all rents due, that they have complied with all covenants (which cover such areas as the use of premises, insurance, repair, etc) and that they give vacant possession.
Who is responsible for insurance on the building?
The landlord is usually responsible for building insurance and the tenant for content but you should check all policies.
Who is responsible for repairs internally and externally?
Typically tenants are responsible for internal repairs. Sometimes part of the rent covers the repair and replacement of certain business assets in the event of an incident such as fire or theft. The landlord is often responsible for building repairs but may recover costs through a service charge.
What are the Business rates costs?
Business rates are a tax on non-residential buildings in England and Wales. They are usually paid, like council tax, in ten instalments. You can visit GOV.UK to estimate your costs. You will need to know the ‘rateable value’ of the property.