If you are going to let out or rent business premises you need to bear some things in mind.
Things do not always work out the way you expect them to so it is important to agree at the outset what the responsibilities of each person are and what should happen if things go wrong. These responsibilities are normally set out in a contract which is commonly called a lease.
You need to consider
- How much the rent will be and when it should be paid
- Whether the rent will be reviewed from time to time and if so, when and how it will be reviewed
- Who is to be responsible for insuring the building and who will be paying for it
- Who is to be responsible for repairing the building and who is to pay for the repairs
- Whether the person renting the property (“the tenant”) will have the right to renew the lease and continue occupying the property for another period
- Whether the tenant will be given an option to ask for early termination of the lease (essential where there is some uncertainty as to whether the business is going to be successful)
- Whether the tenant will be allowed to transfer the lease to someone else (important if the tenant does not want to continue running a business any longer but the lease is nowhere near its end)
- What type of business the tenant can use the property for and whether this can be varied if the tenant wants to change the business use
- Who is to be responsible for services, such as gas and electricity, rates and so on.
- What should happen if either party does not honour the obligations they agreed to abide by when the property was let
- What will happen if the property is damaged or destroyed
- What the tenant’s responsibilities will be at the end of the lease
These are just some of the points that need to be considered. If you do not pay attention to them at the outset you may find yourself in difficulties later that cannot be resolved without going to court, and that can be expensive.
You also need proper advice to ensure that your interests are looked after properly.
There are pitfalls for both landlords and tenants. Here are some common ones:-
- You tie up your property for longer than you had intended
- You overlook providing for regular rent reviews and face real term decreases in rent over the period of the lease
- You fail to pass on to the tenant responsibility towards people visiting the property or injury caused to other people arising from the tenant’s failure to maintain the property
- You agree to a rent review procedure which could involve you in paying more than a normal market rent
- You agree to carry out repairs that involve you in in bringing the property up to a better state of condition than it was when you took the property on
- You agree to reimburse the landlord for the cost of insuring the property but leave yourself open to having to pay the insurer back if they pay out on an insurance claim
- You agree to pay a larger proportion for service charges and insurance charges than you should
- You fail to complete a stamp duty land tax return and incur penalties
- You fail to register your interest in the property against the landlord
The list goes on.
With proper advice you can avoid making these mistakes and be confident that you have done everything you can to protect your investment whether as Landlord or Tenant
For more information contact Peter Haycock at our Leek office on 01538 383201 or by email at firstname.lastname@example.org.