When you want to buy a commercial property, the first thought or question that may come to mind would be, “should I rent or buy”? If you are a U.K. business and wish to rent a commercial property instead of buying it, the solicitors at Larcomes can advise you on a solution that suits your best interest. This article will provide you with advice from our commercial property solicitors covering the best way to rent commercial property for your business successfully.

Finding the most appropriate commercial property for you

The first step in your commercial property business transaction is to decide which commercial property will suit your company’s needs. What will you need? In this regard, you will have to take into consideration your business goals and strategies. How far do you predict your business will grow in the future? If you picture your team growing largely, it may be a good idea to rent office space which will allow you to expand and will also avoid the nuisance of having to relocate.

It may be useful to look into business-building incentives which could help you make the right decision. Some of these business incentives can include:

  • Enterprise Zones 
  • Local Enterprise Partnerships (L.E.P.s)

You could also look at your competitors or others in your industry to see where they currently reside. It is a common misconception that this is a no-go area but doing your research in the proximity of competitors is not necessarily a bad thing for business.

Additionally, you should consider the following when thinking about a commercial property you’re your business:

  • Parking facilities
  • Any local amenities
  • Transport links
  • Delivery facilities
  • The impression the commercial property gives
  • Proximity to customers/clients/staff
  • Internet speeds
  • Equipment and furniture
  • Staff facilities

Considering the costs involved

The next step in your commercial property business transaction is to research the different rent costs in the area. It is important to make a note of rent, especially as a start-up company. If you are a start-up, you will need to save as much money as you can to get your business progression up and running.

The way in which you will pay your rent will vary according to your landlord. At present, generally, rents are paid quarterly, in advance. However, there are some landlords who accept monthly rent payments too. If you do have a long-term lease, your payments may include rent reviews which can alter the total amount you will pay over time. Depending on what lease you have agreed to, the amount could either increase or decrease over time. Details of this will be covered in your rent agreement, so you should take into consideration how often rent reviews take place before signing the terms of your contract, especially if the area is prone to rent fluctuations.

Finally, as a measure of factoring in your costs, you should keep an eye out for hidden costs. Despite the fact that you may have planned and worked around all the costs you believe are involved and factored this into your purchase for the business, you should work with a solicitor for a fixed price quote for all legal fees involved.

Some of these hidden costs can include:

  • Payment of Landlord (legal) fees (from £500 to £3,000). This is often paid upfront- the landlord will require these payments to be undertaken so that they are held on account and that their costs will be paid before instructing their solicitor to take on any work on the matter.  
  • Rent deposit (this is usually equivalent of three to six months’ rent)
  • Fee for Notice of Assignment (£50)
  • Payment of Land Registry and other fees (approx. £250 to £400)

In addition, you may need to cover all or part of the service charges involved in the commercial property that you are renting. This could include any repairs, redecoration, or maintenance work. One thing to remember is that any decorative work is limited when renting a commercial property, so you should check the policy in your contract regarding this with your landlord. If you find your landlord is responsible for the insurance, then you may be required to pay a fraction of this cost too.

Other costs that should be factored into your budget may include:

  • Local authority charges
  • Any professional advice required from commercial estate agents and solicitors
  • Decoration, repairs and ongoing maintenance
  • V.A.T.
  • Moving costs

Negotiating your commercial tenancy agreement

When you rent your commercial property, you will need to sign a lease agreement. This lease will be a legally binding contract which will set out the terms and conditions of the tenancy agreement. It will offer long-term stability compared to an alternative, like a licence. Before you agree to the commercial property lease, you will need to agree with your landlord to the following policies:

  • Lease length and any break clauses
  • When and how bills will be paid
  • Rent and rent-free periods
  • When and how rent reviews will happen
  • Service and maintenance charges – what they include and identified responsibilities

If you are looking to occupy this commercial property for a short timescale, for example, up to six months, then considering a licence might be a good idea, especially if you are a start-up. They can be provided to you on various types of commercial property. These can include:

  • pop-up shops 
  • warehouses refurbished and divided into office space 
  • industrial buildings

The licence fee would be equivalent to that of rent and can be due monthly in advance or even on a weekly basis. This is completely dependent upon the landlord. It is also worth noting that if you wish to stay in the commercial property after your licence ceases, you will have no right of renewal.

When should you agree to a contract?

When you decide to submit an offer on a commercial property to an agent, it is up to the landlord and business owner to agree and discuss the terms of the contract. The terms of the contract can be subject to negotiation and discussion to ensure the result acts in the best interest of both parties.

Once the offer is accepted, you can ask the landlord can be asked to cease all marketing from the commercial property.

Your agreement which has been discussed with the landlord, will cover the key points which have been addressed in the agreement and will include the following points:

  • Type of agreement
  • Rental value, currency and payment arrangements
  • Description of the deal
  • An approx. estimate of the timescale, including the date of completion

Securing your deal

Once everything has been sorted, and your commercial agent and solicitor are satisfied with the state of the commercial property as well as the terms in your contract, you will exchange your contracts. The deal will be legally binding after this contractual exchange, and when the balance has been paid, the transaction has been completed.

Larcomes Expert Commercial Property Specialists

Regardless of the complexity of your landlord and tenant and property law matter, our solicitors in Portsmouth and Waterlooville have the knowledge and expertise to help. We will explain all the options available to you and guide you through the process every step of the way. So, whether you are simply seeking advice regarding a tenancy lease or if you have a dispute with your landlord or tenant, we have the expertise and experience to assist you with your landlord and tenant matters, whatever they are.

Depending on the nature of your situation, your solicitor will discuss all the costs involved with you at the start of your case and ensure you are fully aware of what these costs will be. In certain cases, we can provide a range of fixed and staged fee processes with monthly direct debit arrangements available to help you manage costs.

Get in Touch

To speak with one of our specialist landlord and tenant team, please call on 023 9244 8100 or make an online enquiry.

You can also contact one of the team directly by clicking on the links below:

David Sumner

Gemma Brown