Need advice please!!!
Discussion
Need some help please!
Meeting a landlord tomorrow to speak about terms on a property. Basically the property is being sublet by the landlord, potentially to me. Can anyone give me any pointers on what to ask for. What I should be most concerned with is to agree how long my lease is, so that I don't get myself into a position in the future where the business is established and they end the lease. How many years is a safe lease.
Are there any other things I should find out before I sign on the dotted line.
I really have no idea so any help would be useful. Thanx
Meeting a landlord tomorrow to speak about terms on a property. Basically the property is being sublet by the landlord, potentially to me. Can anyone give me any pointers on what to ask for. What I should be most concerned with is to agree how long my lease is, so that I don't get myself into a position in the future where the business is established and they end the lease. How many years is a safe lease.
Are there any other things I should find out before I sign on the dotted line.
I really have no idea so any help would be useful. Thanx
Blimey - that's a big question!
Assuming that it's a business premises you need to think about...
whether the lease is inside or outside the Landlord and Tenant Act - ie whether you will have any rights to renew the lease at the end of the term. This is a big subject and you really need proper advice on the subject depending on your own circumstances.
Repair - is the property already "in repair" are you going to end up taking on an obligation to put it "in repair"? Is there a service charge for the building (if it's a letting of part) if so how is it proportioned.
How long is left to run on the headlease? Does he have the head landlord's consent to sublet?
VAT - does the landlord charge VAT on the rent? This will depend on whether he has made a VAT election on the premises, if he does charge VAT can you claim it back through your business or is it just going to be an extra cost?
Break clause - will he have one, does the superior landlord have one, will you have one (do you want one?) - some of the answers here will be determined by whether the lease is inside or outside the LTA (point 1).
Rent review provisions - are there any under the headlease - if so when and on what terms - one for your lawyer to look at really but a question to ask in the short term.
Alienation - can you sublet (probably not) or assign if you outgrow the premises, find they are crap etc. etc. (think about in conjunction with the break clause)
Is the landlord going to expect you to meet his costs for getting the superior landlord's consent (and usually the superior landlord's costs), and for all the costs in granting you a sublease - if so how much? Try to at lease split the costs.
Alterations - does the headlease allow you to make alterations to the premises - do you need to make alterations? Will you have to apply for a licence to alter from the superior landlord (more costs)
I'm sure there is more! Sorry if I've scared you!
Assuming that it's a business premises you need to think about...
whether the lease is inside or outside the Landlord and Tenant Act - ie whether you will have any rights to renew the lease at the end of the term. This is a big subject and you really need proper advice on the subject depending on your own circumstances.
Repair - is the property already "in repair" are you going to end up taking on an obligation to put it "in repair"? Is there a service charge for the building (if it's a letting of part) if so how is it proportioned.
How long is left to run on the headlease? Does he have the head landlord's consent to sublet?
VAT - does the landlord charge VAT on the rent? This will depend on whether he has made a VAT election on the premises, if he does charge VAT can you claim it back through your business or is it just going to be an extra cost?
Break clause - will he have one, does the superior landlord have one, will you have one (do you want one?) - some of the answers here will be determined by whether the lease is inside or outside the LTA (point 1).
Rent review provisions - are there any under the headlease - if so when and on what terms - one for your lawyer to look at really but a question to ask in the short term.
Alienation - can you sublet (probably not) or assign if you outgrow the premises, find they are crap etc. etc. (think about in conjunction with the break clause)
Is the landlord going to expect you to meet his costs for getting the superior landlord's consent (and usually the superior landlord's costs), and for all the costs in granting you a sublease - if so how much? Try to at lease split the costs.
Alterations - does the headlease allow you to make alterations to the premises - do you need to make alterations? Will you have to apply for a licence to alter from the superior landlord (more costs)
I'm sure there is more! Sorry if I've scared you!
Piglet said:
Blimey - that's a big question!
Assuming that it's a business premises you need to think about...
whether the lease is inside or outside the Landlord and Tenant Act - ie whether you will have any rights to renew the lease at the end of the term. This is a big subject and you really need proper advice on the subject depending on your own circumstances.
Repair - is the property already "in repair" are you going to end up taking on an obligation to put it "in repair"? Is there a service charge for the building (if it's a letting of part) if so how is it proportioned.
How long is left to run on the headlease? Does he have the head landlord's consent to sublet?
VAT - does the landlord charge VAT on the rent? This will depend on whether he has made a VAT election on the premises, if he does charge VAT can you claim it back through your business or is it just going to be an extra cost?
Break clause - will he have one, does the superior landlord have one, will you have one (do you want one?) - some of the answers here will be determined by whether the lease is inside or outside the LTA (point 1).
Rent review provisions - are there any under the headlease - if so when and on what terms - one for your lawyer to look at really but a question to ask in the short term.
Alienation - can you sublet (probably not) or assign if you outgrow the premises, find they are crap etc. etc. (think about in conjunction with the break clause)
Is the landlord going to expect you to meet his costs for getting the superior landlord's consent (and usually the superior landlord's costs), and for all the costs in granting you a sublease - if so how much? Try to at lease split the costs.
Alterations - does the headlease allow you to make alterations to the premises - do you need to make alterations? Will you have to apply for a licence to alter from the superior landlord (more costs)
I'm sure there is more! Sorry if I've scared you!
Assuming that it's a business premises you need to think about...
whether the lease is inside or outside the Landlord and Tenant Act - ie whether you will have any rights to renew the lease at the end of the term. This is a big subject and you really need proper advice on the subject depending on your own circumstances.
Repair - is the property already "in repair" are you going to end up taking on an obligation to put it "in repair"? Is there a service charge for the building (if it's a letting of part) if so how is it proportioned.
How long is left to run on the headlease? Does he have the head landlord's consent to sublet?
VAT - does the landlord charge VAT on the rent? This will depend on whether he has made a VAT election on the premises, if he does charge VAT can you claim it back through your business or is it just going to be an extra cost?
Break clause - will he have one, does the superior landlord have one, will you have one (do you want one?) - some of the answers here will be determined by whether the lease is inside or outside the LTA (point 1).
Rent review provisions - are there any under the headlease - if so when and on what terms - one for your lawyer to look at really but a question to ask in the short term.
Alienation - can you sublet (probably not) or assign if you outgrow the premises, find they are crap etc. etc. (think about in conjunction with the break clause)
Is the landlord going to expect you to meet his costs for getting the superior landlord's consent (and usually the superior landlord's costs), and for all the costs in granting you a sublease - if so how much? Try to at lease split the costs.
Alterations - does the headlease allow you to make alterations to the premises - do you need to make alterations? Will you have to apply for a licence to alter from the superior landlord (more costs)
I'm sure there is more! Sorry if I've scared you!
thanx for the lengthy reply mate. It was exactly what I needed.
As the situation stands, the landlord still has 15 years of his lease left which includes a few properties which he currently uses. He had written into the terms of his lease a sub-letting clause, which is why he's looking to rent this property out. The Basically I've been quoted a weekly rent (which is really high considering the type of property it is) and also a downpayment of 7k which is for all the fixtures etc already installed.
My main concerns now are the terms of the lease which I need to discuss with him tomorrow. The thing is he's after a quick and simple process with everything, so instead of having his lawyers sort out a lease, then for my lawyer to check it out etc etc. He's suggested that his lawyer simply acts for us both for this deal. I'm not sure if this is common and don't know if I'm leaving myself vulnerable.
Also about the landlord tenant act. How will I know if I am liable to this.
How do I ensure that if he sells up, my potential new landlord 'won't screw me over'.
In terms of VAT, what is an election and how do I make sure that I'm definitely not liable to this.
As I am subletting, if I factor in a breakclause, is this normally to end my lease, just incase the business fails (touch wood).
What is common interval for a rent review and how much can the landlord increase rent by. If they see te business is sucessful and they've wrote in a rent review for 5 years into my lease, could I be left in a position where the landlord decides to double my rent. This could then force me to payup or force me to lose the business and leave, and then he sets up his own copy business.
How do I put myself in a position where I could sell the business in the future. I don't want a rent agreement tieing me down from pursuing other businesses in the future.
How much are the solicitors costs for sorting something like this out and should I prepare myself to pay these costs. I can imagine the landlord could easily force me into paying these costs because I WANT the premises.
Lastly, could I ask what the landlord will be looking to see from me. I know that the landlord also has other clients interested in the property so I want to set a professional example that if he leases the property to me, I am there to stay and my business is not going to go bust after 6 months. Will the landlord laugh if I showed him a business plan, considering this is small business.
Anyway, just want to say thanx for all the help. I'm 20 and at uni and opted out of a regular job in my placement year at uni to start a business instead. To be honest I'm cacking it and appreciate the help.
Edited by qwertyford on Monday 2nd October 23:05
You need professional advice! I would suggest a lawyer and a surveyor.
In my experience Landlords who want a quick and easy deal usually want it as they don;t want their tenant to find out they are being stitched up!
You definitely need a business plan, you say the rent is high considering the type of premises. In that case why consider it? You "WANT" the premises potentially bad news as it implies you are prepared to pay over the odds. Do other people really want it? Landlords will always say lots of people want a property, but then when you decide against it it stays empty for ages.
Whereabouts in the country is this property?
Rent reviews usually 5 yearly, but may be 3, and usually linked to open market rental value. Most rents do not dpend on the viability of the business and the amount it can afford. They are dependent on what the market for that type of property is doing in the area. Many businesses ignore this and just agree to percentage increases in rent.
If business fails and you have personal liability you will need to be able to assign or sublet.
In my experience Landlords who want a quick and easy deal usually want it as they don;t want their tenant to find out they are being stitched up!
You definitely need a business plan, you say the rent is high considering the type of premises. In that case why consider it? You "WANT" the premises potentially bad news as it implies you are prepared to pay over the odds. Do other people really want it? Landlords will always say lots of people want a property, but then when you decide against it it stays empty for ages.
Whereabouts in the country is this property?
Rent reviews usually 5 yearly, but may be 3, and usually linked to open market rental value. Most rents do not dpend on the viability of the business and the amount it can afford. They are dependent on what the market for that type of property is doing in the area. Many businesses ignore this and just agree to percentage increases in rent.
If business fails and you have personal liability you will need to be able to assign or sublet.
chrisgr31 said:
You need professional advice! I would suggest a lawyer and a surveyor.
In my experience Landlords who want a quick and easy deal usually want it as they don;t want their tenant to find out they are being stitched up!
You definitely need a business plan, you say the rent is high considering the type of premises. In that case why consider it? You "WANT" the premises potentially bad news as it implies you are prepared to pay over the odds. Do other people really want it? Landlords will always say lots of people want a property, but then when you decide against it it stays empty for ages.
Whereabouts in the country is this property?
Rent reviews usually 5 yearly, but may be 3, and usually linked to open market rental value. Most rents do not dpend on the viability of the business and the amount it can afford. They are dependent on what the market for that type of property is doing in the area. Many businesses ignore this and just agree to percentage increases in rent.
If business fails and you have personal liability you will need to be able to assign or sublet.
In my experience Landlords who want a quick and easy deal usually want it as they don;t want their tenant to find out they are being stitched up!
You definitely need a business plan, you say the rent is high considering the type of premises. In that case why consider it? You "WANT" the premises potentially bad news as it implies you are prepared to pay over the odds. Do other people really want it? Landlords will always say lots of people want a property, but then when you decide against it it stays empty for ages.
Whereabouts in the country is this property?
Rent reviews usually 5 yearly, but may be 3, and usually linked to open market rental value. Most rents do not dpend on the viability of the business and the amount it can afford. They are dependent on what the market for that type of property is doing in the area. Many businesses ignore this and just agree to percentage increases in rent.
If business fails and you have personal liability you will need to be able to assign or sublet.
The property is in the North east.
It is expensive when its looked at as a plain unit. What I'm paying for is the fact that it is in an excellent location and had all planning permission already granted on it. In my oppinion its also worth the high rent because its simply not easy to get into that industry without at least twice as much to invest as I have now. Its hard for me to explain but I'll try and explain it in numbers. The rent on this unit is roughly 2 times that of a regular unit. However, if a regular unit has the potential to gross £1 per week. This unit has the potential to gross £2+. However, if things don't go to planned, If a regular unit breaks even at 0.50p, this unit will need £1.50 to break even, which makes the risk higher and also why it is more expensive. Its hard to even compare it with similar properties because theres nothing similar.
An object is also only worth what someone is willing to pay for it too. So as far as rent is concerned, I've done my sums and have worked out that it is worth my while to go for it. Fair enough I will be paying higher rent than my rivals, but the business will also make more money than its rivals. The risk is simply whether the business will make as much as anticipated and if not then I will find myself in an awkward position.
Thanx again for the help.
Having been in business over 30 years, my advice would be don'tjump into anything without taking sound advice, certainly don't sign anything in the next few days.......
For example if it was a "full repairing and insuring lease" and the property needed urgent roof repairs during your tenure costing £30,000 YOU would be responsible, not the landlord....
So look before you leap.......
For example if it was a "full repairing and insuring lease" and the property needed urgent roof repairs during your tenure costing £30,000 YOU would be responsible, not the landlord....
So look before you leap.......
Wacky Racer said:
Having been in business over 30 years, my advice would be don'tjump into anything without taking sound advice, certainly don't sign anything in the next few days.......
For example if it was a "full repairing and insuring lease" and the property needed urgent roof repairs during your tenure costing £30,000 YOU would be responsible, not the landlord....
So look before you leap.......
For example if it was a "full repairing and insuring lease" and the property needed urgent roof repairs during your tenure costing £30,000 YOU would be responsible, not the landlord....
So look before you leap.......
Could you elaborate on the repairing part. Does this mean that the downpayment I am expected to put down for the fixtures etc, could still mean that I am liable for structural repairs.
Why does the landlord expect a downpayment too. Is it incase I damage something. Also, if I am putting this downpayment down, i would expect it to be refundable if i was to end the lease, but will they refund a smaller amount, based on the depreciation of the value of the capital.
Hi Querty, I can only echo what Wackyracer has said - do not jump into this without good advice!
Your landlord's lawyer cannot act for both of you, he has a conflict of interest, they might suggest that he sends the papers to you direct but he will not be acting for you or advising you just sending you papers.
You really do need advice on this and you will need to find a solicitor to act for you. You're likely to be looking at fees at around £2k (minimum) for your solicitor, your landlord may well want his fees paid (or part paid) and the superior landlord will want their fees paid for granting consent (around £800 probably).
Unfortuntely I don't have time to answer all of your queries - are you near to your Uni or any Uni? If so go into the law section of the library and find a book on Commercial Landlord and Tenant law and get reading - your ability to get this badly wrong at this stage by jumping into it could jepodise your business plans.
Please don't jump into this today, don't let the landlord pressure you into it on the spot, I know you are keen but you could f*&k it up really badly (and for the next 15 years) at this point by acting hastily.
Your landlord's lawyer cannot act for both of you, he has a conflict of interest, they might suggest that he sends the papers to you direct but he will not be acting for you or advising you just sending you papers.
You really do need advice on this and you will need to find a solicitor to act for you. You're likely to be looking at fees at around £2k (minimum) for your solicitor, your landlord may well want his fees paid (or part paid) and the superior landlord will want their fees paid for granting consent (around £800 probably).
Unfortuntely I don't have time to answer all of your queries - are you near to your Uni or any Uni? If so go into the law section of the library and find a book on Commercial Landlord and Tenant law and get reading - your ability to get this badly wrong at this stage by jumping into it could jepodise your business plans.
Please don't jump into this today, don't let the landlord pressure you into it on the spot, I know you are keen but you could f*&k it up really badly (and for the next 15 years) at this point by acting hastily.
Piglet said:
Please don't jump into this today, don't let the landlord pressure you into it on the spot, I know you are keen but you could f*&k it up really badly (and for the next 15 years) at this point by acting hastily.
All good advice from the other poster - get legal advice.
rush in - repent at leisure.
The commercial side of leases are much more onerous and can seriously damage your wealth if you get a bad deal. You have said you dont know what your looking at in term of the lease obligation. Also what condition is the building in, have you seen the planning permission? when does it expire etc.
You are signing for a long term, dont rush the short term. You dont get anything for nothing.
I agree with the others don't rush in. Also don't forget that if the business does not work out you personally ae likely to have liability for the remaining lease term, and therefore to pay the rent. If you are paying over the odds you will need to find someone else who is prepared to pay over the odds.
Deposit could be for a number of things. The lease may contain clauses about fixtures and fittings, and in particular in what state they have to be returned to the landlord, and that may include renewing them! Deposit may be a rent guarantee. However it is frequently difficult to get the deposit back at the end of the term as is frequently out towards dipaldations.
The advice you need will be partly dependent on the value of the unit. You definitely need a lawyer to make the lease as favourable as possible. May need a surveyor to determine how favourable or otherwise the rent is!
Deposit could be for a number of things. The lease may contain clauses about fixtures and fittings, and in particular in what state they have to be returned to the landlord, and that may include renewing them! Deposit may be a rent guarantee. However it is frequently difficult to get the deposit back at the end of the term as is frequently out towards dipaldations.
The advice you need will be partly dependent on the value of the unit. You definitely need a lawyer to make the lease as favourable as possible. May need a surveyor to determine how favourable or otherwise the rent is!
Thanx again for the advice everybody.
I'm going to look at the property today and have a chat with them about everything. Another thing with the property is that its not advertised through a commercial estate agent. Instead, its been a word of mouth thing amongst a few potential clients. I'm only involved because my uncle did business with them before, and they know that my uncle can run a sucessful business from that unit. To them, I will be my uncles business partner effectively.
Anyway, I'll let you know what happens later on today. Thanx again for all the help. I've gathered that general advice is to not jump into anything without advice so I'll try find a lawyer before I start signing anything. Laters
I'm going to look at the property today and have a chat with them about everything. Another thing with the property is that its not advertised through a commercial estate agent. Instead, its been a word of mouth thing amongst a few potential clients. I'm only involved because my uncle did business with them before, and they know that my uncle can run a sucessful business from that unit. To them, I will be my uncles business partner effectively.
Anyway, I'll let you know what happens later on today. Thanx again for all the help. I've gathered that general advice is to not jump into anything without advice so I'll try find a lawyer before I start signing anything. Laters
qwertyford said:
Wacky Racer said:
Having been in business over 30 years, my advice would be don'tjump into anything without taking sound advice, certainly don't sign anything in the next few days.......
For example if it was a "full repairing and insuring lease" and the property needed urgent roof repairs during your tenure costing £30,000 YOU would be responsible, not the landlord....
So look before you leap.......
For example if it was a "full repairing and insuring lease" and the property needed urgent roof repairs during your tenure costing £30,000 YOU would be responsible, not the landlord....
So look before you leap.......
Could you elaborate on the repairing part. Does this mean that the downpayment I am expected to put down for the fixtures etc, could still mean that I am liable for structural repairs.
Hi...
From what you say (and I mean this in a nice way) you are far too inexperienced to enter into any kind of leasehold contract without taking SOUND legal advice, and I cannot comment on the finer points of the lease because a) I haven't seen it and b) I am not a business lawyer and qualified to comment....
However here are but two examples.......
A man I know entered into a 25 year lease for a shop in the Manchester Arndale centre, with 5 yearly UPWARD ONLY rent reviews at £40,000 pa....
The business did OK for a couple of years, and then declined, he closed the shop, but the Arndale management still wanted £20,000 every three months for twenty three years off him, plus the local authority wanted the money every month for the rates on an empty shop...He ended up having no alternative but to declare himself bankrupt, hence why shopping malls prefer blue chip tenants like WH Smith, Next, Burtons etc, rather than small family businesses.....
Many years ago, we rented a shop in Bournemouth which had a four storey high metal fire escape round the back. It was written in the lease that WE had to repaint it every three years, have you any idea how long it tales to paint a fire escape with all the intricate metalwork, it was like painting Blackpool tower........
.....
Never again.....
So, as I said, be very careful before you sign on the dotted line.........
Edited by Wacky Racer on Tuesday 3rd October 20:51
Everything above is sound and sage advice but for what it's worth I can only reinforce the message to get legal help. Leases of this kind are my bread and butter and for the unwary there are traps and pitfalls in every single line - far too many to set out in this sort of forum.
If you get it wrong you could lose everything you have.
Go and see a specialist lawyer who acts for tenants. Don't try to do this without legal back up.
If you get it wrong you could lose everything you have.
Go and see a specialist lawyer who acts for tenants. Don't try to do this without legal back up.
I'm an industrial/commercial landlord
Get proper advice because you will need to be protected from the more devious type of landlord and you may well want advice on both the proposed lease, any payable deposit or bond and probably you'll need a schedule of condition.
If your landlord is leasing the unit from another landlord, you need to ensure that you don't get saddled with costs that simply are not down to you or that the landlord doesn't seek for you to hand back a unit in better condition than you entered it.
Pay for proper advice because it is potentially a minefield that you may be entering.
Get proper advice because you will need to be protected from the more devious type of landlord and you may well want advice on both the proposed lease, any payable deposit or bond and probably you'll need a schedule of condition.
If your landlord is leasing the unit from another landlord, you need to ensure that you don't get saddled with costs that simply are not down to you or that the landlord doesn't seek for you to hand back a unit in better condition than you entered it.
Pay for proper advice because it is potentially a minefield that you may be entering.
Hi everybody, just to update.
I've been to meet the landlord again today to discuss more clearly the terms. Essentially, the way the landlord wants to operate the whole deal isn't common and anyone in the business wouldn't suggest doing anything this way. However, it does have the advantage of being quick and simple allowing me to move in, sort everything out and beginh trading, especially since Christmas is coming up.
The two things that I needed to safeguard are my rent review periods and amounts etc. The other thing is to protect my tenancy so I don't find myself in a position where the landlord ends my lease.
Basically, after discussion, both of these were not fulfilled by the landlord. I had mentioned previously that the rent I was paying was quite high but the positioning of the business meant that it would still be worth my while to go ahead with it. Then today I get sprung on me, the fact that I will have to contribute 1/3rd of the rates on the building. Basically, does anyone know how these rates are worked out and how we should go about calculating how much each person pays.
Then the other thing about rent reviews. Surely it'd be normal for rent reviews to be atleast about 3-5 years in line with the lease. Instead this guys got it into his head that there should be a bloody rent review every year and a new contract signed as he doesn't want anything as long as 5 years which is what I requested. He kept giving me the argument that it would benefit me because if the business wasn't sucessful then I could pull out after a year. This would then leave me in a situation where I would have invested my money into the business including sunk costs such as advertising etc then not to protect myself from the eventuality that he could whack up my rent forcing me to move out. Another factor for his reasoning is that his rent review is in June next year so this could leave me with stupid high rent which he can't predict.
Basically our compromise was if we could get fixed rent for one year then a 11percent hike for second year, before it is then adjusted to the rate at which his rent has gone up. However, this still leaves me with high rates and protection for only two years.
Everything would be written down in a short contract through a mutual lawyer. At the moment I'm still trying to work out if I can make it work. The bad part is that I'll have to spend another 7-8K on rent and rates each year which a) eats into my profit margin, b) means I need higher business to break even. This is small risk if I am guaranteed business but puts me in a shitter if things don't go to planned. However it does allow me an escape route after a year but by this time the landlord has already found himself in a smart position and can simply find another tenant and the cycle goes on.
Anyway, thanx for all the help again.
I've been to meet the landlord again today to discuss more clearly the terms. Essentially, the way the landlord wants to operate the whole deal isn't common and anyone in the business wouldn't suggest doing anything this way. However, it does have the advantage of being quick and simple allowing me to move in, sort everything out and beginh trading, especially since Christmas is coming up.
The two things that I needed to safeguard are my rent review periods and amounts etc. The other thing is to protect my tenancy so I don't find myself in a position where the landlord ends my lease.
Basically, after discussion, both of these were not fulfilled by the landlord. I had mentioned previously that the rent I was paying was quite high but the positioning of the business meant that it would still be worth my while to go ahead with it. Then today I get sprung on me, the fact that I will have to contribute 1/3rd of the rates on the building. Basically, does anyone know how these rates are worked out and how we should go about calculating how much each person pays.
Then the other thing about rent reviews. Surely it'd be normal for rent reviews to be atleast about 3-5 years in line with the lease. Instead this guys got it into his head that there should be a bloody rent review every year and a new contract signed as he doesn't want anything as long as 5 years which is what I requested. He kept giving me the argument that it would benefit me because if the business wasn't sucessful then I could pull out after a year. This would then leave me in a situation where I would have invested my money into the business including sunk costs such as advertising etc then not to protect myself from the eventuality that he could whack up my rent forcing me to move out. Another factor for his reasoning is that his rent review is in June next year so this could leave me with stupid high rent which he can't predict.
Basically our compromise was if we could get fixed rent for one year then a 11percent hike for second year, before it is then adjusted to the rate at which his rent has gone up. However, this still leaves me with high rates and protection for only two years.
Everything would be written down in a short contract through a mutual lawyer. At the moment I'm still trying to work out if I can make it work. The bad part is that I'll have to spend another 7-8K on rent and rates each year which a) eats into my profit margin, b) means I need higher business to break even. This is small risk if I am guaranteed business but puts me in a shitter if things don't go to planned. However it does allow me an escape route after a year but by this time the landlord has already found himself in a smart position and can simply find another tenant and the cycle goes on.
Anyway, thanx for all the help again.
qwertyford said:
Basically, after discussion, both of these were not fulfilled by the landlord. I had mentioned previously that the rent I was paying was quite high but the positioning of the business meant that it would still be worth my while to go ahead with it. Then today I get sprung on me, the fact that I will have to contribute 1/3rd of the rates on the building. Basically, does anyone know how these rates are worked out and how we should go about calculating how much each person pays.
Business rates are calculated by taking the multiplier and multiplying it by the Rateable Value giving rates payable. The multiplier is set by the government and goes up by the rate of inflation every year AND a % to take into account the amount lost out of the rate pool by people applealling against their assessment sucessfully.
The Rateable Value represents the annual rental value as at 1st April 2003. So if you agree a high rent potentially the Rateable Value will increasee as well. Each individual commercial property should have its own assessment so you should have your own Rateable Value, and the other occupiers of the building have their own. This has been taken to the extreme with serviced offices where each office has its own assessment! Whilst one can apportion the rates between the three occupiers it is asking for trouble. As in 2009 one could decide the proportion is unfair and complain to the Valuation officer. They could then split the assessment into 3 potentially backdating to 1st April 2005. If the apportion has been wrong one or mre party's could get a nasty surprise!
I work with Business rates most days so feel free to ask more about it!
qwertyford said:
Then the other thing about rent reviews. Surely it'd be normal for rent reviews to be atleast about 3-5 years in line with the lease. Instead this guys got it into his head that there should be a bloody rent review every year and a new contract signed as he doesn't want anything as long as 5 years which is what I requested. He kept giving me the argument that it would benefit me because if the business wasn't sucessful then I could pull out after a year. This would then leave me in a situation where I would have invested my money into the business including sunk costs such as advertising etc then not to protect myself from the eventuality that he could whack up my rent forcing me to move out. Another factor for his reasoning is that his rent review is in June next year so this could leave me with stupid high rent which he can't predict.
Basically our compromise was if we could get fixed rent for one year then a 11percent hike for second year, before it is then adjusted to the rate at which his rent has gone up. However, this still leaves me with high rates and protection for only two years.
Basically our compromise was if we could get fixed rent for one year then a 11percent hike for second year, before it is then adjusted to the rate at which his rent has gone up. However, this still leaves me with high rates and protection for only two years.
Most rent reviews are to "open market rent" or similar and are not based on a percentage increase. However what often happens is the Landlord suggests a rent increase of say 50%. Once the tenant has picked themselves back up off the floor they say I can't afford that but I can afford say 25%. The lanldord says make it 30% and its a deal. However throughout this the Landlord may know that rents have not in fact moved! However as he now has one increase of 30% he can use it to persuade his neighbouring tenants to pay 30% more!
I re-iterate take independent professional advice, soulds ike not only are you going to pay too much rent but you are going to compound that by agreeing some remarkably lousy terms for yourself!
Having just read this thread, I would strongly reiterate the advice given to get some specific legal advice asap.
When I was looking for my first business premises, I almost talked myself into the first place I saw, because I thought in my head it was ideal. All the small niggles seemed unimportant to me and almost inconsequential, as I was convincing myself that the office was perfect.
I came very close to signing a 15 year lease for several thousand square feet more than I needed. I was ready to agree to three year rate reviews, responsibility for all business rates etc.
It then took several months to find somewhere that was appropriate, affordable and with a landlord that I could agree the correct terms with.
Looking back now, it was the best thing I ever did, and has helped on other premises I've since needed to lease.
When I was looking for my first business premises, I almost talked myself into the first place I saw, because I thought in my head it was ideal. All the small niggles seemed unimportant to me and almost inconsequential, as I was convincing myself that the office was perfect.
I came very close to signing a 15 year lease for several thousand square feet more than I needed. I was ready to agree to three year rate reviews, responsibility for all business rates etc.
It then took several months to find somewhere that was appropriate, affordable and with a landlord that I could agree the correct terms with.
Looking back now, it was the best thing I ever did, and has helped on other premises I've since needed to lease.
qwertyford said:
Essentially, the way the landlord wants to operate the whole deal isn't common and anyone in the business wouldn't suggest doing anything this way. However,.
ahhhuumm.
You have answered your own question.
dont get taken for a fool. - (Its the nicest way I could put it)
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