Steve Johnson, 3rd October 2016
Looking for your first commercial property can be very daunting with a lot of new information to take in and terminology to understand. We thought it would be useful to explain some of the terms you might come across.
Unlike residential tenancies, most commercial tenancies make the Tenant responsible for some, if not all of the repairs and maintenance for the property. Full repairing means the Tenant is responsible for both internal and external repairs. Internal repairing means the Tenant is responsible for internal repairs only. When a tenancy is on an internal repairing basis, there may also be a service charge payable, which could then include a contribution towards the cost of external repairs and the upkeep of areas used in common with other occupiers.
It is common for the Tenant of a commercial property to reimburse the Landlord the premium for obtaining buildings insurance. If there is a service charge, then the cost of buildings insurance may be included in this.
This is a mechanism included within a lease to allow the rent to be adjusted to keep it in line with current market rents, i.e. the going rate that similar properties in the vicinity have been let for. It is the norm for rent reviews to be upward only, which will mean that your rent would not be reduced even if rents in the vicinity have decreased.
This is the equivalent of Council Tax for a residential property and is paid to the Local Authority. It would be prudent to contact the Local Authority to obtain an estimate of the amount of Business Rates you are likely to have to pay and if you are eligible for any Small Business Rate Relief.
As Letting Agents, we will usually request three references, one bank reference and two trade/personal references. Your bank will usually make a small charge for providing this service. Most Landlords will insist on seeing references before agreeing to let a property to you.
It is normal when letting a commercial property for the ingoing Tenant to pay some, if not all, of the Landlord’s legal costs for preparing the lease. You may also wish to employ your own Solicitor to act on your behalf.
The majority of commercial properties require an EPC to be produced before they can be marketed. An EPC is a rating to show how energy efficient the property is. It can also provide useful tips (including the costs involved) of improving the property’s energy efficiency.