A guide for Commercial Landlords letting their property

Considering letting your commercial property? Davis Brown – a firm of Chartered Surveyors and Estate Agents in W1 are here to help you with the process. We are regulated by the Royal Institution of Chartered Surveyors so you can take full advantage of our professional expertise. Here are a few criteria that you should consider first of all:

  • The user clause, size and condition of the property
  • Location of your property and proximity to transport links and amenities
  • Market Trends
  • The Unique Selling Points of your property

You need to ensure that your property complies with all relevant Health & Safety Regulations (ensuring gas, electrical and asbestos reports are up to date). You will also require an EPC (Energy Performance Certificate). It is a legal requirement that Landlords must provide before the property can be put on the market to let or sell. Ensure that you have Building Insurance and ask your solicitor to check any lease restrictions which may prevent you letting to certain tenants. Davis Brown’s Commercial Lettings Department in Fitzrovia will be happy to assist you here.

 

Landlord Considerations:

Once you have the above information to hand, contact Davis Brown – your commercial agent and discuss what you are looking for in a tenant. Also consider the following details and discuss them with your agent so that they can give the prospective tenants as much information as possible before viewings take place and time is wasted, to ensure your incoming tenant has full knowledge of the facts of the lease their company will be taking on:

 

  • Lease length (are you willing to take a short lease or do you require 10 years +?)
  • Break Option (do you wish to grant a break, will this be mutual or landlord only and what notice period do you require?)
  • Service Charges (are you willing for the incoming tenant to “cap” their service charge or not and what does the service charge cover?)
  • Rent Deposit (how much do you require)
  • Dilapidations (what are the incoming tenant’s responsibilities?)
  • Building Maintenance (when are the next works to the building both internal and external being undertaken and what are the incoming tenants contributions?)
  • Lease Restrictions (do you wish them to have the option to assign or sublet the lease, do you have any other restrictions which they should be made aware of – i.e. building works or changes to the premises they are letting?).
  • Additional Charges (ensure the incoming tenant is aware of all additional charges which may not have been advertised – these will normally include their building insurance contribution and possibly a “sinking fund” contribution).

Tenant References and Credit Checks:

All prospective tenants will need to provide full company accounts. Bank details and current landlord details of any prospective tenant will be obtained by your commercial letting agent here at Davis Brown so that references can be obtained. We can also discuss together the rental deposit that you will require.

Legal Requirements:

Energy Performance Certificates (EPCs)

All new lettings will legally require an EPC. It is the landlord’s responsibility to provide a valid EPC and this must be available before the property is marketed. Contact your agent to arrange an EPC if there is not a valid certificate for the premises.

Gas Safety

The 1998 regulations place a legal duty on Landlords and agents dealing with rented properties. The regulations require all gas appliances, pipework and flues from the appliances to be checked annually by a qualified Gas Safety Registered engineer. A valid Gas Safety Certificate must be issued each time and updated every 12 months and a tenancy cannot commence without the appropriate certificate. Failure to comply is a criminal offence for both the Landlord and the Landlord’s agent.

Electrical Certificate

You need to ensure that you have a valid certificate for any common parts of the premises. Your tenant is responsible for providing this for their demised area.

Asbestos Report

You need to ensure that you have a valid certificate for any common parts of the premises. Your tenant is responsible for providing this for their demised area.

Building Insurance

You also need to make sure that the building is covered by buildings insurance. When the building is tenanted this cost will usually be covered by the tenant.

 

Accepted Offer:

Once an offer has been accepted, your agent will send out Heads of Terms to all relevant parties and their solicitors, setting out the draft terms of the lease. Once the Heads of Terms have been accepted your agent will place the property “under offer” and further viewings of the property will cease. Davis Brown will then request that draft contracts are sent to the relevant parties and will liaise with your solicitor to ensure a swift timescale to completion.

 

On Completion:

On completion of the lease your solicitor will collect any monies due. Once the monies have been cleared and the lease has been signed by all parties, your agent will then arrange with the incoming tenant a suitable time to collect the keys. If your agent manages the premises on your behalf, they will also take meter readings (gas, electric, water etc) and contact all suppliers, including the local authority (business rates) to notify them of the new tenants.

 

Break Clause:

If your lease has a “break clause” which allows either you or the tenant to terminate the lease before the lease expiry date, ensure that your agent makes a note of the date this must be completed by. Should you wish to terminate the lease, notice must be given in writing. Your agent will be able to assist you in this matter.

 

Expiry of the Lease or Exercising your Break Clause:

Around 3 months before your lease expiry, it is advisable to contact your agent and request they commence marketing the premises for a new tenant. Your agent will then visit the premises to take marketing photos and possibly new measurements. Your agent will liaise with the current tenant with regard to access for any viewings.

 

Schedule of Dilapidations:

Generally, 1 or 2 months before the current tenants vacate, we would suggest that you appoint your agent/surveyor to visit the premises to undertake a “Schedule of Dilapidations”. This will provide the outgoing tenants with a step by step guide of all works that must be undertaken to the premises before they leave, this will ensure that the premises are left in a good state of repair and condition.

 

Moving Out:

If you agent manages the property, they will visit the outgoing tenant to undertake meter readings and to collect all keys to your premises.  They will also inform the current suppliers (gas, electric, water) of the tenants “moving out” date and inform the local authority in relation to their business rates.

 

For more information, please contact Davis Brown – your Estate Agents and Chartered Surveyors based in W1 – who will be happy to help you every step of the way.

 

 

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