If you’re interested in buying a commercial property, take a look at Perry Hill Chartered Surveyors’ guide and make sure you get the best return on your investment.
Choosing the location of your commercial property
When buying any property, whether it’s residential or commercial, location is always going to be an important factor to consider. Town centre and prime business district locations are always in high demand but they come at a premium price. However, a lot of smaller businesses now deal remotely with their clients and simply require an out-of-town base for staff to drop in for meetings.
Your property purchase is always going to be an investment, just like when buying a house, it is important to look at the location and any future development area. These will all have an effect on your property’s value whether positive or negative.
Commercial property is a viable investment medium – commercial mortgages
With attractive financial yields, a commercial property can make for a sound business investment to take advantage of. It’s also worth remembering that when you make an investment, you can deduct the tax from interest payments on commercial mortgages.
Get the right survey – commercial property surveyors
Don’t just rely on the basic survey that your mortgage-lender insists on. Whether you need a pre-acquisition building report or Homebuyers report, be sure to get the correct commercial property valuation performed by a reliable commercial property surveyor.
Budget for property costs
Budget for all eventualities. As with any property, there will be costs involved, whether that’s long-term upkeep and ongoing maintenance, or unforeseen repairs and emergency fixes.
Don’t forget about parking
Whatever the business, employees are going to have to arrive at their workplace somehow and at least some of them are going to require parking.
Renting out commercial property
Letting documents
When entering into a letting agreement with a client, you’ll need to obtain the correct documents and establish a clear agreement. Failure to do so could make it difficult to remove tenants later if they are in breach. The surest way to manage your property is to use a professional commercial property management company, which can offer knowledge and experience of the local market as well as legal and contractual advice.
Commercial lease
A lease is a contractual agreement between you and your tenant. With a commercial lease, your tenant gains exclusive possession of the property for a specified period of time. Exclusive possession gives your tenant the right to exclude anyone, including the landlord, from the property for the duration of the lease. The duration of your commercial lease will need to be established before signing. When you do need to extend your lease, our expert valuers will inspect the property and provide you with a formal lease extension valuation.
A licence
A licence gives permission for someone, i.e. the licensee, to do something on your property. The licensee does maintain access to the property and you can get it back when required.
A tenancy at will
This is only really used for short-term agreements. A tenancy at will means the tenant can use the property but the arrangement can be interrupted by either the landlord or the tenant at any time.
Repair and maintenance obligations under a commercial lease
Tenants will usually be responsible for the “reasonable” repair and maintenance of a rented commercial property; as the landlord, you will be responsible for structural repairs to the property. Obviously, since these terms are open to interpretation, issues can and do arise, so it is important to define all terms before the tenancy commences.
Repair covers damage to a portion of the property which needs to be fixed. Tenants are responsible for any damage which they cause to your property for the duration of the lease. Maintenance, on the other hand, involves taking steps to avoid deterioration of the building and its systems. Disputes often arise over repairs being required, and whether they are due to poor maintenance on the part of the tenant or through reasonable wear and tear, which would then be the responsibility of the landlord.
Structural repairs are necessary to hold the building together, such as foundations, walls, roofs, and floor structures. Unless expressly identified, you, as the landlord, will generally be responsible for structural repairs.
Make sure your lease is well worded
The surest way to avoid any potential discrepancies is to ensure that your lease is clearly written and outlines the standards to which your property must be maintained. This should include references to industry standards for ventilation and heating systems, that equipment manuals be followed, and that tenants only use qualified technicians for any on-site work. Your lease should also prescribe specific times and frequencies at which maintenance tasks and check-ups should be conducted.
Terminating a commercial lease
You can hopefully avoid this by conducting regular property checks and enforcing maintenance work before the situation progresses too far. Terminating your lease should be your last resort since in these cases, courts often grant tenants relief from forfeiture, and if you failed to give sufficient notice, you may even be ordered to pay your tenant’s damages.
If you find yourself stepping in to perform your tenant’s obligations and performing maintenance work on their behalf, you cannot be assured of ever recovering your money back.
What to do if your tenants don’t meet their obligations
Many leases give tenants a period of time in which they must complete any required maintenance work. If the initial deadline is not met, you will need to issue the first notice of default, stipulating a specific time frame in which the work must be completed and that failure to do will result in you potentially terminating the lease, or taking over the tenant’s responsibility.
Commercial property agents – Perry Hill Chartered Surveyors
Whether you’re buying a commercial property to rent out or as an investment for your business, Perry Hill Chartered Surveyors have extensive experience in rental leases and agreements. Give us a call on 01483 237333 or contact us here.
