Advice for first time commercial property tenants

Recently we have helped a handful of new businesses take on their first commercial tenancies. Of all the advice we gave, it was the breakdown of costs that our clients most appreciated.

So we thought it would be useful to list the costs that, upon completion of a lease, a commercial tenant is responsible for...

Rent
Depending on whether a rent-free period has been negotiated, tenants will need to pay an apportionment of rent to the landlord. Rent is usually due monthly or quarterly. If quarterly, this could be a substantial sum and therefore tenants should be wary not to splash out on refurbishments and marketing without having funds saved away.

Tenants should take into account that their payments of rent throughout the term of the lease could change if there is a rent review. A rent review, as the name suggests, is an alteration of the rent payable. It is usual during a mid to long-term lease that this will occur. The fewer rent reviews there are, the more advantageous it is for the tenant because reviews are usually drafted as 'upward only'. This means that the rent which is payable will not decrease.

Rent Deposit
This will be payable if tenants have agreed to pay a rent deposit for security of compliance with the terms of the lease.

Service Charge
If tenants are renting premises which forms part of a building (eg an office floor) then the landlord is likely to be responsible for repairing the main structure and the upkeep of any common parts (eg lifts). The way in which the landlord is reimbursed for this maintenance is through a service charge

Insurance
The landlord will usually insure the premises and the tenant will either reimburse the whole amount of the insurance premium or a proportion of the premium if there are multiple premises within the building.

Stamp Duty Land Tax (SDLT) 
Tenants could have a SDLT liability to pay to HMRC depending on the length of the lease, the rent payable and whether a premium is paid for the premises. We would be happy to advise on whether SDLT will be payable and assist on submitting your SDLT Return to HMRC.

Land Registry registration

Leases for a term of seven years or over are registrable at the Land Registry and there is a fee payable for this registration. This fee varies on the amount of rent payable, but is usually around £40.
 

We pride ourselves on being upfront with costs; we always make our clients aware of the payments which will be due at the outset, so that plans and budgets can be made accordingly.

If you want any advice on commercial property, please contact me direct on tel: 01603 724651 or by email at: JFarrington-Breeze@cozens-hardy.com