Steps to follow
Do you want to change business premises? Whether buying, selling or renting premises, it is a good idea to use a specialist commercial property solicitor who will be able to negotiate the best possible terms and carry out the appropriate searches.
When choosing a property, bear in mind the rateable value. These are calculated on the basis of the open market rental value and are revised every five years by the Valuation Office Agency.
Before you buy, make sure the premises are big enough, have the right facilities, are in the right location and meet legal requirements for health and safety and fire.
Be aware of all the upfront costs required to purchase. These include professional fees, VAT and stamp duty land tax, search fees, fitting costs, business rates, repairs and running costs.
If you are selling, fix anything that is broken and ensure you are up to date on compliance with any regulations. Find out whether capital allowances can be applied to any machinery. Collate any documents regarding repairs. Obtain consent from the lender if the property is subject to a loan.
Make sure the buyer has the necessary finance in place before you commit.
Before contracts can be exchanged with the buyer, you will have to complete a property information form and a fixtures and fittings form, produce the title deed and any charges, draft the contract setting out the main terms and send to the buyer’s solicitor, complete the required searches and survey, and produce an energy performance certificate.
If you want to rent the premises, pay attention to repairing obligations. You may want to have a survey done before signing up to ensure there are no hidden defects for which you could become responsible. Agree the state and condition of the property with your landlord before you vacate.
When negotiating the lease, make sure there are break clauses allowing you to end the lease without penalty at certain points, for example, every five years.
By law (Landlord and Tenant Act 1954), business tenants have a right to renew the lease when it comes to the end of its term, unless the landlord wants to move in, or redevelop, or the tenant has consistently failed to pay rent.
What to watch out for
Make sure the lease allows you to assign it or sub-let the premises. The landlord usually reserves the right of approval but the clause should say consent won’t be withheld unreasonably. Watch out for an authorised guarantee agreement which means you won’t be released from your obligations when you assign the lease but will have to pay up if your successor fails to meet the terms. If the landlord insists in including this, try to offer something as an alternative, for example, a rent deposit.
Solicitor’s top tip
If you only want to rent premises for a short time, for example, a few months to complete a special order, then a licence rather than a lease may be the best option. These tend to be more flexible and contain fewer obligations. The drawback is that you don’t have an automatic right to renew a licence, so you will have to be sure the length of time is adequate for your needs.
Buying or selling business premises
Overview of business property
Renting a business property obligations on a commercial tenant