Renting a commercial property is exciting and is a huge step in your business journey, that should be celebrated. However, when looking for commercial property for rent, the process requires careful planning.
In this blog, we’ll explore everything you need to know about how to rent commercial property in the UK, to ensure the process runs smoothly and efficiently.
Step 1. Find the right property
When finding the right property for your business there are a few things you should ask yourself, such as:
- How much space do we need? - This can be determined by asking yourself the following further questions:
- How many people do we currently employ?
- How many desks do we need?
- How much equipment and stock do we need to store in our building?
- Do we plan on taking on more staff in the future?
- Where do I want my business to be located? - Many factors come into play when figuring out where your business should be located. For example:
- Being placed near shops, restaurants and transport links provides an ideal workplace that’s easy to travel to and offers excellent opportunities for socialising.
- Certain places have better and easier connectivity to WiFi.
- Other places have more power available to the site.
It all depends upon what your business is and what is important for operating your business.
Step 2. Identify your budget
When looking for commercial property to rent it can quickly become expensive, making it key that you identify your budget before viewing a property. A few costs you will need to be aware of include:
- Professional fees - When you’re looking to rent commercial property, it’s advised to obtain advice from an agent or surveyor, as well as a solicitor to ensure the terms and conditions of the agreement are in your best interest. While this does incur an extra cost initially, it can save you money in the long run. For example, an agent will know what rents are appropriate for the market and will be able to tell you what terms are fair in the circumstances.
- VAT - Commercial properties are often quoted exclusive of VAT however, an option to tax may have been made which means that VAT will be payable. You must check this before entering an agreement as this will affect your budget. VAT can also only be claimed back if your company is VAT registered.
- Rent payments - Rent payments may not be inclusive of other costs like utility bills and maintenance costs. You should check with the Landlord to see whether you will be expected to pay other costs on top of rent.
- Rent deposits - Rental deposits are a common part of the rental process and are paid on top of rent. They are usually held by the Landlord for the length of the term of the lease and can be utilised to cover any rent payments a tenant may miss.
- Any business rates and rates payable - Business rates are a tax on non-domestic property. They’re calculated based on The Valuation Office Agency (VOA) and are typically revised every 5 years. To calculate rates payable - your business rates bill - you will need to multiply the Rateable Value (RV) by the multiplier for the current tax year.
- Utilities - Businesses usually need to pay utilities on top of rent as this is often calculated on usage. It’s recommended to view the Energy Performance Certificate (EPC) for the property to see how energy efficient it is before entering an agreement.
- Decorating and repairs costs - Your rental agreement should state your obligations, such as whether you’re responsible for paying for repairs, ongoing maintenance or decorating the property. It would be advisable to include a photographic schedule of condition to any lease agreement to ensure that there is evidence as to the state of the property when the lease was first entered into.
- Service charges - Service charges usually include the management, maintenance and repair of shared parts of the commercial property. If you do need to pay a service charge, it’s important that you understand what’s included and that you budget in the costs. It is advisable to ask the Landlord for the last three years of service charge accounts and the current years budget so that you can review how the service charge has been managed.
- Building insurance - Building insurance is usually obtained by the landlord and the premium is often recharged to the tenant. Obtaining the budget for the current year's building insurance premium will help you understand whether you’re being charged a fair price or not. You will also need to obtain contents insurance.
- SDLT - You may have to pay Stamp Duty Land Tax and this should be considered as part of your budget.
Step 3. Negotiate your agreement
Commercial property is completely different to residential property. As a result, we recommend working with a commercial property solicitor to help you effectively negotiate the terms of your agreement.
Parts of your agreement that you may want to negotiate include:
- The lease term - When you commit to a longer lease term, you’re more likely to be picked as a tenant for the property, but you must agree to an amount of time that best suits you.
- The break clause - leases can be left early if a break clause is included. It depends upon the location of the property, the type of property and demand as to whether or not a break clause is appropriate. If it is then you should be aware that if you don’t comply with the terms outlined in the lease, you may not be able to exercise the clause.
- The rent - The rent price can be negotiated and should be based on what similar properties are priced at in the market. It is advisable to seek the opinion of an independent surveyor to help with this.
- Repairs - Before agreeing to the proposed terms you should review the property to see if any repairs are needed and whether you would be expected to fix them. It’s a good idea to get a building survey to make sure you’re aware of any problems. The landlord may fix them before you move in or may offer rent incentives in lieu of work as a part of the agreement.
- Alterations and decorating - It’s a good idea to get consent in writing from your landlord to confirm whether you’re able to make some alterations and what alterations they are. If your business is regularly making alterations, you may wish to include an agreement that you can do certain alterations without the Landlord’s consent as you will have to pay the landlords professional costs each time you obtain consent.
Step 4. Complete the agreement
The agreement will be completed once all parties are happy with the state of the property, the agreement is signed and the money has been paid. It’s crucial that you understand all terms and conditions of the agreement and if you’re unsure it’s perfectly okay to ask questions. You could ask things like:
- How much is the rent?
- When and how is the rent reviewed?
- What costs am I responsible for?
- Is there a clause break included in the agreement?
- Is there a service charge and if so how much is it?
- Will the lease be excluded from the Landlord and Tenant Act 1954?
Gain expert commercial property legal advice with Legal Clarity
At Legal Clarity, our team of commercial property solicitors have a wealth of knowledge and experience that enables them to deliver proficient advice and guidance on all things commercial property, including acting for landlords and tenants to negotiate leases and consents under them.
Get in touch with us today for further information and queries.
FAQs
Do I need a solicitor to rent a commercial property?
While you aren’t legally required to use a solicitor when renting commercial property, it is recommended. Commercial property solicitors can help you review the agreement and identify any potential issues, negotiate the terms, prevent disagreements between the landlord and tenant and much more.
At Legal Clarity, we provide advice and guidance on various areas of commercial property to help people better navigate looking for commercial properties for rent. Get in touch with us today for further support.