Commercial estate agents rental percentage
Discussion
In the case of a commercial letting, a good commercial agent will advise and take up references on the incoming tenant and request information on their trading ability etc. and reduce the possibility of the landlord letting the premises to a tenant with little trading history etc. The agent will normally advise on rent deposits, break options, service charges and whether the lease should be excluded from the Landlord and Tenant Act etc.etc. and allow the landlord to stand back from the negotiations in the event of multiple offers being received when it can sometimes get very stressful/controversial.
Finally, the agent will draft the Heads of Terms that instruct the landlord's legal advisor and they can also chase the incoming tenant and their legal advisor through the drafting of the lease and in the majority of instances the agents work on a "no letting/no fee basis"(except for agreed marketing costs).
In a potentially challenging economy commercial agents can really earn their fees in adding value IMO as their market knowledge and professional experience aren't acquired easily.
Ultimately if a landlord wants to try and save some £s, crack on as it isn't as easy as it appears and the actual cost of a letting agent's fees are small compared to unfortunately agreeing a poorly worded/agreed lease and the long-term implications until expiry (or possible temporary loss of capital value of the property whilst the tenant is in occupation).
Finally, the agent will draft the Heads of Terms that instruct the landlord's legal advisor and they can also chase the incoming tenant and their legal advisor through the drafting of the lease and in the majority of instances the agents work on a "no letting/no fee basis"(except for agreed marketing costs).
In a potentially challenging economy commercial agents can really earn their fees in adding value IMO as their market knowledge and professional experience aren't acquired easily.
Ultimately if a landlord wants to try and save some £s, crack on as it isn't as easy as it appears and the actual cost of a letting agent's fees are small compared to unfortunately agreeing a poorly worded/agreed lease and the long-term implications until expiry (or possible temporary loss of capital value of the property whilst the tenant is in occupation).
I am really surprised that the replies so far have all defaulted straight to advising on rent and covenant (Hi Noel by the way! Hope life at AK is good!). Its part of the deal, but a relatively small one.
The value also comes in other areas, including advising properly on lease terms, especially around areas like Alienation (that's the right for a tenant to sub let or assign the lease to another tenant and can be an area of risk if your tenant sub lets or assigns to another business with a poorer covenant), Repairs (what should form the basis of the repairing obligation and how do you manage this properly - what are the obligations of the tenant on things like yield up and vacation). Alterations, what the tenants should reasonably be allowed to do and what they shouldn't and how that should be managed. There are loads of opportunities here for a good agent to add value to the process and trust me, falling out with a tenant you and pursuing them through the courts because they've assigned the lease to a shell co and disappeared into the sunset will cost you more than an agents fee ever will.
Of course you then get a well informed market view who has evidence of recent transactions to use to support the rent you are looking for and to know and advise on areas like balancing incentives to a tenant to help the tenant and protect your income stream from lease outset.
If you get a really good one they can also start to advise you on things like sustainability and renewables, capital allowances, refurbishment specifications, building and structural surveys and suddenly owning property becomes really simple because you've got a partner who really knows their stuff and you forget how difficult it was before....
But that's the difference. You need to find a good one.
The value also comes in other areas, including advising properly on lease terms, especially around areas like Alienation (that's the right for a tenant to sub let or assign the lease to another tenant and can be an area of risk if your tenant sub lets or assigns to another business with a poorer covenant), Repairs (what should form the basis of the repairing obligation and how do you manage this properly - what are the obligations of the tenant on things like yield up and vacation). Alterations, what the tenants should reasonably be allowed to do and what they shouldn't and how that should be managed. There are loads of opportunities here for a good agent to add value to the process and trust me, falling out with a tenant you and pursuing them through the courts because they've assigned the lease to a shell co and disappeared into the sunset will cost you more than an agents fee ever will.
Of course you then get a well informed market view who has evidence of recent transactions to use to support the rent you are looking for and to know and advise on areas like balancing incentives to a tenant to help the tenant and protect your income stream from lease outset.
If you get a really good one they can also start to advise you on things like sustainability and renewables, capital allowances, refurbishment specifications, building and structural surveys and suddenly owning property becomes really simple because you've got a partner who really knows their stuff and you forget how difficult it was before....
But that's the difference. You need to find a good one.
Thanks for the replies. All I wanted to know is whether 10% was the going rate. Having got a couple of agencies quoting it seems it is (coupled with the feedback on here of course). I knew property values and rental values would be down - supply and demand and all that. I'm guessing they're both down by 30%+ in my region. You can't fight the market - it is what it is. And, of course, I'm not lumbered with the Business Rates when it's rented out.
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