Is this typical of a lease?
Discussion
I've agreed a price on a unit to rent but when the lease was sent across I noticed there is a 5% increase each year on rental price. I queried this and was told this is taking into account inflation, alternatively I have to pay ~£500pa for a survey to be completed to revalue the unit and have to pay the increase anyway. Is this typical? Lease is for 5 years.
No it's not typical for a standard unit, it's normal to agree a rent review every 5 years, sometimes every 3 years depending on the total lease length, based upon the Market Rent of the unit as at the Rent Review date. If you can't agree the rent at that time then there will be a process to follow - Independent Expert or Arbitrator determination.
Fixed rental uplifts are more typical of large units let to very strong companies - think Tesco, Amazon, DHL etc. And of those agreed, whilst the calculation is based upon annual increases, the rent generally only increases at the agreed rent review date - 3 or 5 years. Also, the uplift is generally fluid based upon RPI or CPI at the time - a cap and collar of 2% to 4% is typical.
The problem you have is that there is a shortage of supply of industrial units, so I suspect there's opportunism from Landlords. Plus, if your annual rent is small the cost of agreeing a disputed Rent Review (you need to pay a Surveyor) could exceed the proposed increase.
If you wanted to propose a compromise - then agree annual RPI uplifts, only payable at the Rent Review date (3 or 5 years) subject to a cap and collar of 2% and 5%. If the landlord is confident RPI is to remain high their income is safe. If reality is different, you don't get punished.
Didn't notice this was for a 5 year lease - not a chance, landlord is a chancer.
Fixed rental uplifts are more typical of large units let to very strong companies - think Tesco, Amazon, DHL etc. And of those agreed, whilst the calculation is based upon annual increases, the rent generally only increases at the agreed rent review date - 3 or 5 years. Also, the uplift is generally fluid based upon RPI or CPI at the time - a cap and collar of 2% to 4% is typical.
The problem you have is that there is a shortage of supply of industrial units, so I suspect there's opportunism from Landlords. Plus, if your annual rent is small the cost of agreeing a disputed Rent Review (you need to pay a Surveyor) could exceed the proposed increase.
If you wanted to propose a compromise - then agree annual RPI uplifts, only payable at the Rent Review date (3 or 5 years) subject to a cap and collar of 2% and 5%. If the landlord is confident RPI is to remain high their income is safe. If reality is different, you don't get punished.
Didn't notice this was for a 5 year lease - not a chance, landlord is a chancer.
Thanks for the responses chaps, I need the premises in the short term so I'll sign the lease and utilise the 18month break clause so I don't have to pay the inflated rates and can find something else. I raised the point that the rent price was already agreed and the increases were atypical and were completely ignored...
Edited by StottyGTR on Wednesday 29th March 14:35
StottyGTR said:
Thanks for the responses chaps, I need the premises in the short term so I'll sign the lease and utilise the 18month break clause so I don't have to pay the inflated rates and can find something else. I raised the point that the rent price was already agreed and the increases were atypical and were completely ignored...
Check the Break Clause very carefully then to ensure you know how to exercise and can exercise it! If the landlord is underhand to introduce an annual 5% uplift in the rent I suspect the lease is very landlord friendly and tenant unfriendly!Edited by StottyGTR on Wednesday 29th March 14:35
Chrisgr31 said:
StottyGTR said:
Thanks for the responses chaps, I need the premises in the short term so I'll sign the lease and utilise the 18month break clause so I don't have to pay the inflated rates and can find something else. I raised the point that the rent price was already agreed and the increases were atypical and were completely ignored...
Check the Break Clause very carefully then to ensure you know how to exercise and can exercise it! If the landlord is underhand to introduce an annual 5% uplift in the rent I suspect the lease is very landlord friendly and tenant unfriendly!Edited by StottyGTR on Wednesday 29th March 14:35
I am pleased that my landlord is more motivated by being left alone and receiving consistent rent on time than he is reviewing the rent periodically, the trade off being you perform more maintenance than usual of course.
This has been playing on my mind. I slept on it and I agree with the sentiment. I don't have enough legal knowledge to understand the various clauses in the lease and are aware I could easily be stung. I think I'll look for a more trustworthy landlord, god knows what I'm going to do with the 3 cars I need to store in the meantime though!
As a commercial surveyor I can confirm that these are definitely not standard terms. As others have said you would normally expect rent to be set for 3 or 5 years.
How big is the unit?
Maybe suggest as a compromise a stepped rent?
It sounds like a landlord being greedy because of the shortage of industrial units.
How big is the unit?
Maybe suggest as a compromise a stepped rent?
It sounds like a landlord being greedy because of the shortage of industrial units.
How much is it op if you don't mind me asking? I let out units for folks to store cars and work on them. Havnt increased priced in 5 years. I could charge more but long term reliable tenants are what I want so no point rocking the boat on good ones. Have had a few referrals as well as everyone who has left has been very happy with them.
I agreed a lease on a commercial property on I own which is 1.5% annual increase.
He is happy as no big shocks to come down the line. I'm fine with as the Landlord as compounded it's a very fair return.
Too many Landlords are snotty barstewards who think they're somehow 'better than yow'.
He is happy as no big shocks to come down the line. I'm fine with as the Landlord as compounded it's a very fair return.
Too many Landlords are snotty barstewards who think they're somehow 'better than yow'.
Unit is around 750sqft for £750/month, or over £900/month by year 5 
Annoyingly I paid a £750 deposit prior to seeing the lease, an expensive lesson has been learnt. Prior to paying the deposit I contacted the women organising the lease and queried if there were any other overheads or costs to be aware of. She never mentioned anything about increased rental costs or rental review fees, the deposit was paid on this basis. Then the lease came through with these 5% yearly increases. I'm sure this can't be legal and it's certainly not ethical, but as it was a phone call I'm not sure I can do anything about it.
Annoyingly I paid a £750 deposit prior to seeing the lease, an expensive lesson has been learnt. Prior to paying the deposit I contacted the women organising the lease and queried if there were any other overheads or costs to be aware of. She never mentioned anything about increased rental costs or rental review fees, the deposit was paid on this basis. Then the lease came through with these 5% yearly increases. I'm sure this can't be legal and it's certainly not ethical, but as it was a phone call I'm not sure I can do anything about it.
Oh Lord, £900 per month equates to £14.40 per sq ft. My work is in Yorkshire and I’ve never seen workshop unit rents that high, even for brand new stuff.
Sorry can’t be much more help.
Unless you’ve seen somewhere better value I’d let the tenancy run its course then leave at the break.
Sorry can’t be much more help.
Unless you’ve seen somewhere better value I’d let the tenancy run its course then leave at the break.
StottyGTR said:
Unit is around 750sqft for £750/month, or over £900/month by year 5
Annoyingly I paid a £750 deposit prior to seeing the lease, an expensive lesson has been learnt. Prior to paying the deposit I contacted the women organising the lease and queried if there were any other overheads or costs to be aware of. She never mentioned anything about increased rental costs or rental review fees, the deposit was paid on this basis. Then the lease came through with these 5% yearly increases. I'm sure this can't be legal and it's certainly not ethical, but as it was a phone call I'm not sure I can do anything about it.
On what basis did you pay this deposit? Was it actually a deposit? For that matter, was the lease actually a lease (as opposed to a licence)?Annoyingly I paid a £750 deposit prior to seeing the lease, an expensive lesson has been learnt. Prior to paying the deposit I contacted the women organising the lease and queried if there were any other overheads or costs to be aware of. She never mentioned anything about increased rental costs or rental review fees, the deposit was paid on this basis. Then the lease came through with these 5% yearly increases. I'm sure this can't be legal and it's certainly not ethical, but as it was a phone call I'm not sure I can do anything about it.
I can't think of many circumstances in which you could pay a deposit before sight of the proposed lease, and then not be able to get your deposit back. £750 is small claims / MCOL territory, so I or others here would I'm sure be happy to look over the paperwork and see if you have a case for getting it back.
(IANAL but I deal with commercial property quite a lot on my own account and for others)
soxboy said:
Oh Lord, £900 per month equates to £14.40 per sq ft. My work is in Yorkshire and I’ve never seen workshop unit rents that high, even for brand new stuff.
Sorry can’t be much more help.
Unless you’ve seen somewhere better value I’d let the tenancy run its course then leave at the break.
It’s amazing how many people don’t do the basic maths and work out a rate per sq foot when taking a unit. £x per week, or month sounds good until you do the maths and work out it’s twice the going rate for brand new units on the local industrial estate!Sorry can’t be much more help.
Unless you’ve seen somewhere better value I’d let the tenancy run its course then leave at the break.
Thinking about it I wonder whether this is some form of serviced unit, as they may have percentage increases built in.
skwdenyer said:
On what basis did you pay this deposit? Was it actually a deposit? For that matter, was the lease actually a lease (as opposed to a licence)?
I can't think of many circumstances in which you could pay a deposit before sight of the proposed lease, and then not be able to get your deposit back. £750 is small claims / MCOL territory, so I or others here would I'm sure be happy to look over the paperwork and see if you have a case for getting it back.
(IANAL but I deal with commercial property quite a lot on my own account and for others)
Her words were "deposit to secure the unit while I process your application" although it does say if I decided not to go ahead then the deposit would not be refunded. I was thinking about going down the small claims court route, if for anything just to learn how the process works. I'm a bit naive and paid the deposit as I presume people are open & honest, luckily it is rare I come across people like this.I can't think of many circumstances in which you could pay a deposit before sight of the proposed lease, and then not be able to get your deposit back. £750 is small claims / MCOL territory, so I or others here would I'm sure be happy to look over the paperwork and see if you have a case for getting it back.
(IANAL but I deal with commercial property quite a lot on my own account and for others)
Are links permitted to be posted on here? If so, here's the 900+/month beauty to feast your eyes on
https://www.gumtree.com/p/commercial-property-to-r...
My tape measure said it was 4.6m wide too.
Chrisgr31 said:
soxboy said:
Oh Lord, £900 per month equates to £14.40 per sq ft. My work is in Yorkshire and I’ve never seen workshop unit rents that high, even for brand new stuff.
Sorry can’t be much more help.
Unless you’ve seen somewhere better value I’d let the tenancy run its course then leave at the break.
It’s amazing how many people don’t do the basic maths and work out a rate per sq foot when taking a unit. £x per week, or month sounds good until you do the maths and work out it’s twice the going rate for brand new units on the local industrial estate!Sorry can’t be much more help.
Unless you’ve seen somewhere better value I’d let the tenancy run its course then leave at the break.
Thinking about it I wonder whether this is some form of serviced unit, as they may have percentage increases built in.
StottyGTR said:
skwdenyer said:
On what basis did you pay this deposit? Was it actually a deposit? For that matter, was the lease actually a lease (as opposed to a licence)?
I can't think of many circumstances in which you could pay a deposit before sight of the proposed lease, and then not be able to get your deposit back. £750 is small claims / MCOL territory, so I or others here would I'm sure be happy to look over the paperwork and see if you have a case for getting it back.
(IANAL but I deal with commercial property quite a lot on my own account and for others)
Her words were "deposit to secure the unit while I process your application" although it does say if I decided not to go ahead then the deposit would not be refunded. I was thinking about going down the small claims court route, if for anything just to learn how the process works. I'm a bit naive and paid the deposit as I presume people are open & honest, luckily it is rare I come across people like this.I can't think of many circumstances in which you could pay a deposit before sight of the proposed lease, and then not be able to get your deposit back. £750 is small claims / MCOL territory, so I or others here would I'm sure be happy to look over the paperwork and see if you have a case for getting it back.
(IANAL but I deal with commercial property quite a lot on my own account and for others)
Are links permitted to be posted on here? If so, here's the 900+/month beauty to feast your eyes on
https://www.gumtree.com/p/commercial-property-to-r...
My tape measure said it was 4.6m wide too.
Last sold (freehold) for £40k in Aug 2022 (8b made £86k). So the quoted rent of £795pcm represents a 23% yield.
On that basis, if you can afford to finance a loan (not a resi mortgage, so probably ~50% down) then I'd buy one! Even at 6%, that would be less than £130 a month after the £20k deposit. And if you can finance it on an unsecured personal loan, that might be even cheaper right now bizarrely.
Yields on small units tend to be large, but that is a lot of money. Paying that money for easy-in / easy-out terms is one thing; paying that money for rather onerous terms is quite another.
As regards getting the deposit back, I (or others) would need to get sight of water documentation you have, especially anything you signed, but certainly anything that induced you to part with money. BTW, did the landlord understand clearly that you were intending to use the premises for non-commercial use?
As regards your point about people being reasonable: this is commercial property. There are few if any consumer protections. Assume everybody is lying to you and you won't go far wrong...
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