My First Lease What Should I Do?

 

We market the services of independent Surveyors. Surveyors pride themselves on a high standard of work. We can offer Schedules of Condition with regard to leases , Property Reports, Schedules of Dilapidations, Section 18 Valuations, Scott Schedules, Commercial Building Surveys, Structural Reports, Specific Defects Reports. Note these are not for bank lending but are to advise you how much we feel the property is really worth. If you have a property problem we may even already have written an article on it and we would refer you to the many articles we have on our home page 1stAssociated.co.uk. use independent surveyors who are more than happy to chat. Please Free phone us on 0800 298 5424 and surveyor will call you back.

 

Becoming a tenant for the first time CEILING LIGHT.jpg

One of the most important moves for a business is when it moves into a property, be it a home business that has developed to such a stage that you require an office, or opening an independent shop on the high street that you have always wanted to, or running the dream public house or restaurant, or be it a manufacturing business that requires industrial space to operate within, or a distribution centre. All of these businesses at some point or other will look at property.

 

Freehold or leasehold?

There are two choices with property; freehold or leasehold. A newish business may not have the credit to buy freehold and therefore considers a leasehold option. An older business may not wish to tie up capital within a property and feels that it can make far more money by having a leasehold property. Either way a business owner comes to take on his first leasehold and become a leaseholder or tenant.

 

The search for a suitable leasehold or freehold property

First comes the search for a suitable property. Chatting to business owners over the years it is very rarely the perfect property at the right time. Compromises are made on the property, be it location, size, configuration, rent being paid under the lease, etc. However, the last two are negotiable (rent paid and the lease), to some extent such things as the location and configuration of the building are set in stone or brick (if you excuse the pun). It cannot be emphasised how important it is to make sure the lease you get is the lease you want, so seek specialist expert advice on the lease from both a specialist solicitor and specialist surveyor.

 

Is a leasehold or freehold the right property for you?

Who should you trust?

There are many ways to search for the right property for you from commercial agents (also known as letting agents) to business transfer agencies (known as BTAs) who usually sell the business and the lease to literally driving around in the area that you want to have your property, or good old fashioned word of mouth and networking and we have even known some companies to mail shot the area where they would like a property. Probably the most common way of finding a property is using a commercial surveyor, commercial agent or letting agent (more or less the same under different names). If you spend some time looking for a property commercial agents almost become your friend in helping to understand and identify your needs and find you a property, but be aware that they are working for the seller of the property and not you (unless you are a retained client, in which case they are hunting down the property for you and you are paying a fee for this).

When finding the right property for you, with all the various compromises that are acceptable is offered by the commercial surveyor or agent, that has become almost like your friend over the months/years, that you have been looking, it is very tempting to accept the property there and then and many a rash decision at this stage has been regretted for years to come, and we mean years to come.

 

What length of lease should I go for?

While leases are no longer as long as they once were, 21 years, 25 years, 30 years, 99 years, more typically being 3, 5, 10 or 12 years. This probably affects the way markets change so much quicker these days but it should be remembered that the length of the lease is usually negotiable and it can be reduced by adding a break clause. We know of one lease that actual has two break clauses and we are sure that there must be a lease with break clauses of more than two out there (if you have one or know of one please phone us and talk about it, we would like to know more). To some extent most leases are renewable, assuming the landlord isn't redeveloping or something similar and, of course, why wouldn't a landlord want to renew a lease.

 

What does a solicitor do when I buy my commercial lease?

Whilst we are not solicitors we would summarise that a solicitor gives you the legal advice on the lease purchase in process, which differs from business advice and property advice. The solicitor will have expected you to do your due diligence and to understand what does and doesn't work for you and this will include getting property advice. Very often they will recommend that you have a surveyor / commercial surveyor advise you, or they will have expected you to have sorted this out yourself, either way, the solicitors give legal advice. Generally they err on the cautious side as they are well aware of the increasing sue able culture of people in general.

They will usually offer you a heads of term summary on the lease advising what clauses they think should be negotiated upon.

They will also interpret ye olde worlde English language and the solicitor speak, although equally we have seen this interpreted in such a manner that it will still difficult to understand! (Again this is a personal view and your solicitor may be different).

 

Solicitors rarely visit the leasehold or freehold property and give legal advice from the office

What the solicitor won't do is visit the property (or very rarely) so that he can read the lease in relation to it (or in all the cases that we have dealt with this doesn't happen), what he will be doing is looking at a standard lease that has been written and amended by another solicitor that, again, is unlikely to have visited the property and in turn he will be looking for legal errors, legal traps etc, to protect you against. Most solicitors these days will recommend a schedule of condition, which will be produced by your own surveyor.

 

Solicitors give legal advice not business advice

We really just wanted to reiterate the heading of this. Please remember that solicitors are giving you legal advice, not business advice and it is up to you to make the business decision.

 

So do I need a surveyor?

Simply, when buying the leasehold (or the freehold) on a commercial property we feel it is best to get advice on it from someone that has done this before and understands property and that will be a commercial surveyor.

 

What does a commercial surveyor do?

A commercial surveyor will have a working knowledge of leases and so understanding of the laws relating to them (at least a commercial surveyor specialising in this area will have. You need to use your due diligence to ensure that you have a commercial surveyor and is used to dealing with this sort of thing). At the start of a lease you may employ your own surveyor / commercial surveyor to investigate what is on the market to give you an opinion of what the open market rent is on the property that you are looking to purchase (this can be completely different to the market value the commercial agent has the property on the market for!). However, when most businessmen / potential leaseholders first meet a surveyor is when their solicitor recommends they have one look at the property and carry out a structural survey.

 

Structural surveys on commercial properties

A structural survey on a commercial property which is leasehold entails the surveyor looking at the whole property to establish if there any inherent defects and if there are they will advise on the action required to correct and any anticipated costs. Please see example of commercial survey attached. Alternatively what they may do is carry out a schedule of condition. This is a record of what the property looks like at the start of your lease. This then should be agreed with the landlord and appended to the lease to ensure that in years to come when you move on from the property any dilapidations notice that is served upon you can be negotiated upon utilising the schedule of condition as the original record of the condition the property was in. We would just add it is surprising how many tenants wish they'd had a schedule of condition carried out from day one.


Structural surveys and schedules of conditions on commercial properties

Another alternative is to have both of the above carried out; a structural survey and the schedule of condition. We always advise that this allows you to buy the leasehold on the property with your eyes wide open from day one and the schedule of condition offers you the best way to exit the lease at your chosen time.

 

How much is the property worth for market rental?

The businessman taking on his first leasehold property when he starts out may not know the typical rent for it. Very soon, as they look around the properties available they start to get a feel for what the market rent is, or to be more exact, they get a feel of what the market rental is of the properties shown on a commercial agent's website, not the market rents that are actually paid. Let us reiterate this.

The rent on the property that is on the commercial agents website or in the window is not necessarily the market rent, but the market rent is the rent from the area that is typically being paid. The landlord may have aspirations for a far higher rent. A surveyor with specialist knowledge in this area should be able to advise you.

 

Market value

The market value of a property is a combination of the market rent and year's purchase value, which is a multiplier also known as an all risk yield, which when the market rate is multiplied by it gets the value of the property. The skill is knowing what figure, or multiple, should be used against the market rent, as well, of course, as establishing what the market rent is. This is carried out by specialist surveyors, usually appointed by the mortgage lender, to establish what the value that you as the business owner and tenant have put on the property and that which has been shown by the commercial agent truly reflects what the typical person in this market would pay. The Royal Institution of Chartered Surveyors defines different requirements for different markets within the red book, which are guidance notes if you need help.

We have produced a number of articles and book reviews on dilapidations, for more information go to:

Information on Dilapidations

 

If you need help and advice with regard to leases, dilapidations, schedules of condition, dilaps claims, Scotts Schedules or any other matters please call 0800 298 5424 for a friendly chat. Please note we are independent surveyors.

If you would like Dilaps Help then please visit our www.DilapsHelp.com website and for Disputes go to our Disputes Help site www.DisputesHelp.com

The contents of the website are for general information only and are not intended to be relied upon for specific or general decisions. Appropriate independent professional advice should be paid for before making such a decision.

All rights are reserved and the contents of the website are not to be reproduced or transmitted in any form in whole or part without the express written permission of 1stAssociated.co.uk. We are interested in what you think about our article on My first lease what should I do? If you think we have missed important points or made errors please contact us (we are only human) and the Dilaps web site was set up to help everyone to share knowledge and understanding.

 

building engineers

Home Buyers Reports Property Surveys - why we're the best. Engineers Reports
© Copyright 1stassociated.co.uk

1stassociated-logo-for-footer IVSA-badge IVSA-putting-client-first call-us-for-footer

New Survey Software for more information click here Survey Software 1st | Modern Methods of Surveying

We have thousands of free property articles to help you - or call us freephone on 0800 298 5424

We have been working in the property industry for many years and have been
providing free property articles for over ten years. All for free and to help you with buying your next property.

House and Home Surveys and Useful Information

All you need to know about Building Surveys

Building Control, what do they do?

Designers and Architects will they save me money or will they cost me money

Enviroment, Your Building and Garden Gnomes

Estate Agents help sell houses and work for the vendors

Have a Structural Survey to protect you against structural problems

Home improvements, builder problems and ideas for you on how to solve them

How a Surveyor values a property, Chartered Surveyors and Regulated Valuers

How Chartered Engineers and Building Engineers can help you

Listed Buildings and Conservation Areas

NHBC National House Building Council

Structural Surveys and How We Can Help You

Traditional and Non-Traditional Houses and Mortgage Problems

Valuations and how much is the building worth?

Whats the difference between a Chartered Building Surveyor, Chartered Surveyor and an Independent Surveyor

Useful property problem articles by Chartered Surveyors explaining building issues to avoid

External - Helpful information on building problems on the outside of the property

Chimney issues and problems

Cracking and Movement Problems and Surveying Solutions

Flat Roof Problems, how we can solve them

Foundations and Structures and Settlement and Subsidence and Underpinning

Pitched Roofs Problems and Solutions

Roof Problems

Wall Problems

Windows and Doors and Fascias and Soffits and Wet Rot and Dry Rot and other problems

Internal - House problems we have investigated inside

All you ever need to know about floors

Asbestos in your home, what you need to know

Ceiling Cracks and Structural Problems

Condensation, Damp and Black Mould Problems

Cracking and Movement Problems and Surveying Solutions

Windows and Doors and Fascias and Soffits and Wet Rot and Dry Rot and other problems

Woodworm is it a problem or not? Is it active or not?

Services - Building help and advice on costly services

Drainage, what's underground can affect what's above ground

Heating; I just can't get my house warm enough or alternatively I just can't get my house cool enough

You can't mess around with the electric, you need an expert

 

Commercial Property Services

Building Terms Explained and Directories

Commercial Property Surveys

Commercial Structural Surveys

Leisure Facilites

Offices Large and Small

Shops and Retail

Warehouse and Industrial Buildings

Dilapidations Help and Advice What is a Dilapidations Notice?

A Beginner's Guide to Dilaps

Damp Mould and Condensation

Dampness Rising Damp Mould Black Mould Condensation

Dilapidations and Negotiations

Dilapidations Claim by a Landlord

Energy Saving what can I do?

Finance what is a Financial Adviser (We are not Financial Advisors)

Fire Risk and Help

Health and Safety Risks

Insurance how do I get the correct property insurance?

Landlords Surveying Advice

Property Investment how can I invest in property?

Property TV Reviews by an Independent Surveyor

Schedules of Condition Leasing a Commercial Property

Scotts Schedule and Section 18 Valuation

Tenants Surveying Advice

Weather how does weather affect my property?

Flooding

Rain

Snow and Ice

Strong Winds

Reviews from clients on Commercial Building Surveys

Churches and Charities, helpful reviews from our clients

Industrial Buildings and Warehouses and what our clients say about us

Offices Large and Small, reviews and feedback from our clients

Pubs, Restaurants, Hotels and other Leisure facilities we have surveyed over the years

Shops and Retail, helpful reviews from our clients

 

First Time Buyers

Buying a Leasehold or Shared Freehold Home

Buying and Selling Houses for the experienced house and home purchaser

First Time Buyers how do I go about buying my first house and home?

Improve your property knowledge with our presentations on house, homes and commercial property

Building Surveys

Building Surveying Useful Information

Dilapidations

Dilapidations Presentations in Detail

Final Year Building Surveying Exams for University Students or those that would like to know more

How old is your Building? Which era was it built in?

Party Walls

Surveyors and Design Tools

Disputes and Party Walls

Boundary Disputes

Building and Property Disputes

Party Wall Book Reviews

Party Walls Your Rights and Responsibilities

1stAssociated Surveyors Review for Structural Surveys and Building Surveys

Building Surveys, reviews and feedback from satisfied customers

Buy to let property clients, what they say about our structural surveys

Buying at auction, review of the survey

Buying bungalows and retirement properties and how our surveyors can help

Both at work / busy couples, how we can help and some 1stAssociated client reviews

Families with a young person flying the nest, reviews and feedback

First Time Buyers, what they say about us

Listed buildings, structural surveys

Older buildings, a review of buying an older house

Families with children looking for a new home, feedback and reviews

Buying a Non-Traditional Property

Residential Surveys

House and Home Surveys

Commercial Building Surveys

Commercial Surveys

1st Associated Surveyors Are Also Available in the Following Areas:

East Anglia and East

South and South East

West Country and South West

Midlands

North and North East

 

London

London Markets

London Parks

 

Wales

Areas of Britain

1stAssociated Independent Expert Property Surveyors

Specialists in Home Buyers Reports, Building Surveys and Structural Surveys and Schedules of Condition

All Surveyors are Royal Institution of Chartered Surveyors qualified and RICS regulated

and are Members of the Independent Surveyors and Valuers Association

Putting the Client First

We do not accept service of documents by email or fax