Getting the right base for your business - property

Getting the right base is critical to success and as well as being well connected to other parts of the country, Warwickshire hosts a wide range of sites, premises and business parks to suit every business including county council owned business centres to help new start-ups and grown on space. We have vibrant towns centres as well as a thriving rural economy.

The county council's Inward Investment team provides all the help that companies need for a successful move and over the last five years, has assisted over 2,000 companies with their search for commercial premises, resulting in over 200 successful relocations.

The team can provide a tailored service that will help find the best property solution for your business and is free and confidential. Contact the team on 01926 412140 to discuss your requirements or alternatively search for commercial property online by visiting http://invest.warwickshire.gov.uk/commercial-property-warwickshire/

Top tips in avoiding the pitfalls when leasing a commercial property

Local property agent and lease specialist Martyn Howard MRICS of Drake Howard Property gives an insight to critical sections of the commercial lease and consequences to business costs.

According to Martyn, while the tenant does not invest in the long term future of the property, they should be equally, if not more, diligent in assessment of cost implications of occupation covenants in the lease contract:

1.    Repair and Yield Up covenants are of key importance. Landlords will press for full repair responsibility to pass to the tenant. To do so, the premises should be in good tenantable repair and condition. If not, it is reasonable for a prospective occupier to record the disrepair and either, insist on remedial work, take a greater financial incentive to cover the cost of the work, or seek an indemnity against return of the property to the landlord at the end of the lease term in ‘perfect condition’.

2.    If the tenant intends to alter the premises to suit the business, so long as alterations do not materially affect the structure or change the character of the building, it is worth investigating the landlord’s willingness to forgo the usual requirement for reinstatement of the works at the end of the lease. This will be an expensive undertaking and add to the alterations outlay. If the proposal is raised early in negotiations the pressure for acceptance is usually compelling.

3.    Dilapidations are a growth area of litigation and can easily run into six figures for medium and larger sized properties. The wording of repair covenants must be properly considered from the outset and the cost of remedial work constantly reviewed and not underestimated. The repair liability will include mechanical and electrical service installations at the building and may catch out the unwary as ‘repair’ can extend to replacement. More often than not, the M&E element forms a substantial part of a dilapidations claim and certification provided by a landlord, via responses to legal enquiries, should be closely scrutinised. For certainty, engage a qualified engineer to check the condition and predict the useful life of plant and equipment, over the lease term.

4.    Rent Review frequency, gearing and assumptions establish the mechanism for calculation of future rent payments and in the case of dispute, a third party determination procedure. There are modern alternatives to established review formats to explore. Gearing to market value is no longer set in stone and the rent can be linked to economic indices, business performance or other formulae. If the basis is to arrive at Market Rental Value, the tone of ‘assumptions’ and ‘disregards’ explicit in the clause, will determine the outcome. Softening the tone can secure a measurable reduction in the rent under review and clarity of wording will avoid expensive independent determination costs.

5.    Service Charges if the scope of services and charging arrangements are reasonable a service charge gives benefits to the tenant. The landlord provides services for which the tenant would otherwise be directly responsible and a landlord, or agent, will be able to achieve scale discounts from contractors employed at larger, multi-let properties, or estates. The rub lies in the ‘reasonableness’ of the clause format and efficiency of management. The expert trained eye will focus on shortcomings, having regard to both the RICS Code of Conduct to which regulated Chartered Surveyors adhere and, decided cases of excessive expenditure by unscrupulous landlords.

6.    Break Clauses offer businesses flexibility to terminate a lease early, if for example, the company has achieved growth beyond that predicted at the commencement date, or if the overheads are no longer competitive in the market. The tenant will be able to walk away, except where critical conditions imposed on the break are not precisely adhered to. There are many examples of law suits filed where a tenant is thought to have failed to strictly perform on these conditions.

7.    Other letting terms where value savings can be negotiated before the ink is dry include conditions on assignment and under-letting, the scope of buildings insurance cover and the reinstatement period, empty rates liability at the end of a lease and the terms of release of a rent deposit.