Leasing a commercial property
Being at the stage where you need to upscale your business by leasing business premises is exciting. Your business has grown to the point where you need to expand, or where your existing operations need to come together under one roof.
Finding the right property is the most important thing, but even before you get to this stage, you’ll need to find out exactly what you will be able to afford, remembering to take all factors (in addition to the rent) into account.
Commercial property outgoings to budget for:
Whilst it isn’t the sole factor you will need to consider, rent is an important one. Try to negotiate on the amount of rent to be paid each month, especially if you are able to commit to a longer lease. You will also need to take VAT into consideration, although you may be able to claim it back.
Depending on the type of commercial property you decide to lease, service charges could cover anything from alarm systems, cleaners and maintenance. This is also usually subject to VAT.
Stamp Duty Land Tax (SDLT)
Over a certain value threshold, SDLT must be paid on commercial properties. Ask us for more information about this if you are unsure whether this would apply to the commercial property you would like to lease.
Land Registry fees
Leases granted for a term of 7 years or more require registration at the Land registry. Certain other leases may also need noting at the Land Registry.
As with buying a property, we would recommend that property searches are undertaken. As a minimum, these include a local authority search, water and drainage search and environmental search. Whether you decide to make these searches is up to you, but we would point out entering into a lease is a substantial commitment. In addition to the rent and service charge commitment, you must bear in mind that the business depends upon being able to operate from the premises and the purpose of the searches is to ensure that you would be able to do so.
Another tax for businesses leasing commercial property is business rates used to help pay for local council services. Calculated according to the value of the property rather than the value of the business, these can add up to 40% to the cost of leasing a commercial property, although there are instances where businesses qualify for business rates relief. Ask us for more information if you are unsure whether you qualify, or would like to get an idea of how much you would have to pay for the commercial property you would like to lease. Alternatively visit: https://www.gov.uk/introduction-to-business-rates/overview
Local authority services
If you are leasing a standalone property and so are responsible for things like your own waste disposal, then enlisting the local authority to assist with this will need to be something that you budget for.
Bills and utilities
Just like a residential property, commercial properties need electricity, gas and water. It’s highly likely that you will also need internet and telephone services. In addition to these, if you have a television anywhere, even if it’s in a break room, you will also need a television licence.
There will undoubtedly be expensive equipment and items of value stored in your commercial property – whether it’s a laptop or a piece of machinery. Protecting these against damage, fire and theft is something that you will definitely need to budget for.
If you don’t pay a service charge to cover cleaning, then you may have to employ your own cleaning services, unless this is something that can be done in-house. Decide how often your commercial property would need to be cleaned and get a couple of quotes before including cleaning services in your budget.
If you don’t have provision for parking free of charge at the commercial property premises, then you may have to pay to reserve car parking spaces or to budget for public car parking.
If you already have furniture, equipment, machinery etc. then you will need to consider how you will move this from where it is currently being stored to your new commercial property premises; whether this is hiring a van and moving it yourself, or arranging for a removals company to do it for you.
If you don’t already have the furniture needed for your new commercial property, this is something that you will need to factor into your budgeting. Something as simple as a reception desk or seating is easily overlooked when considering upfront costs.
Repairs and ongoing maintenance
If you are responsible for the maintenance of your commercial property and something breaks, will you have the funds available to fix or replace it? Or will you regularly need support with maintenance, so much so that you need to employ a service or a member of staff? Also, consider decoration and improvements – anything from adding in an extra plug socket needs to be carried out professionally with health and safety in mind.
Consider whether you’ll also need things like stationery, washing up liquid, paper towels, toilet paper, a printer, waste paper bins etc. Depending on the amount of people working at your commercial property, the costs for things like this can easily add up.
Lease and solicitor’s fees
Last but by no means least, is a lease. Without one of these you are leaving yourself open to all kinds of serious problems and liabilities, so it’s crucial that a signed lease is in place before you move in.
It’s always best to have your own specialist commercial property solicitor look over a commercial property lease before you sign it, even if the landlord that has sent you the lease creates them on a regular basis. There could be something in the lease that doesn’t suit your individual circumstances or business plans or similarly, there could be something that you need to add to the lease which isn’t in a standard version.
Legal advice about leasing commercial properties
To speak to a commercial property solicitor who specialises in commercial property leases, contact us using one of the telephone numbers below. Alternatively, you can email me with any questions you may have directly at firstname.lastname@example.org