If you own a commercial property and you are seeking to extend or redevelop it, you are likely to need to gain planning permission for your site.

It can sometimes be difficult to know which renovations necessitate commercial planning permission.

It is most likely that you will need planning permission for a commercial premises if you are intending to:

1. Build a completely new commercial property
2. Make a major change, such as the addition of an extension or large-scale renovation, to your commercial property
3. Change the use of your commercial property to residential, or change an existing residential property to become one which is fit for commercial use

If you’re in any doubt regarding whether or not your commercial building project will require planning permission, the best thing to do is to get in touch with your local planning authority (LPA). They will be able to provide you with all the necessary information.

Commercial planning permission: working from home

If you work from your home and are planning to extend or change your space to accommodate your business activities, bear in mind that this may also require you to obtain commercial planning permission.

You should start to think about obtaining commercial planning permission if:

1. You have increased (or you are planning to increase) the number of people visiting the premises
2. Your business involves activities that are not typical for a residential area
3. Your business activities run the risk of disturbing your neighbours – especially at unreasonable hours – restricting their space or otherwise impacting them
4. Your employees work at your home, but are not residents there

Enforcing commercial planning permission

It is extremely unwise to proceed with the building work if you are in any doubts about whether or not you require planning permission.

If your project needs planning permission and you begin work without obtaining it, you may be served an enforcement notice. This will require you to undo any work completed and revert the property or site to its original state.

If you are served an enforcement notice it is vital to adhere to it, as ignoring an enforcement notice is illegal. You can however appeal to have it revoked.

What to do once commercial planning permission has been granted

Once commercial planning permission has been granted you can technically implement your building or refurbishment plans immediately. However, this is not necessarily a wise decision. All planning permissions are subject to challenge and it is possible to revoke them. In the event of this happening after you have begun to make changes to the site, you will be served an order stating you must cease work and revert the property to its previous condition.

The most sensible course of action is to wait six weeks after receiving planning permission before implementing any changes on your commercial property or site. After six weeks you can proceed, with the knowledge that your planning permission will not be revoked.

The team at Martin Slowe are specialists in commercial property management across London and Hertfordshire. If you are seeking advice in negotiating commercial planning permission, appealing against a government enforcement notice or valuing your property, get in touch with our team of landlord and tenant service experts. With more than 50 years of industry experience, we will be happy to help you.

The post Commercial planning permission: What you need to know first appeared on Commercial Property Management London | Martin Slowe.

If a tenant in your commercial property has failed to pay their rent, this may cause financial uncertainty and it can be difficult to know how best to resolve the issue, especially if you have never experienced this before as a commercial landlord.

Things to consider if your commercial tenant is not paying rent

Before taking action against your commercial tenant for failing to pay their rent, there are several things worth considering, such as:

1. Has the tenant broken the terms of their lease in any other way besides not paying their rent?
2. Is this an isolated incident, or has the tenant missed multiple rent payments?
3. Is the tenant solvent and financially secure? If you have doubts that they are, pursuing legal action could lead to bankruptcy in certain cases, making it less likely that you will get your money back
4. Would you rather keep the tenant or repossess the property? If you do not think that you can find another tenant quickly you may lose money by recovering possession
5. Does the tenant have any guarantors who can settle the outstanding funds on their behalf?

Forfeiture

When a commercial tenant breaches any of the terms of their lease, you generally have the right to ‘forfeiture’. This means you are free to re-enter the property and terminate the commercial lease.

Forfeiture may be a good option for you if your main priority is recovering possession of the commercial property in question. If you can re-let the property to a new tenant with little difficulty, or simply wish to redecorate or even sell it, you should consider forfeiture, especially if you doubt your tenant’s ability to pay the outstanding sum.

Forfeiture is however not without its risks. A commercial tenant can apply to the court for relief from forfeiture within six months of the day you terminate their lease. In such scenarios the court will base their decision on the settlement of rental arrears.

If the tenant can settle their arrears the court may award them relief, meaning that they can retake the property. This will be problematic if you are in the middle of redecorating the property, or you have already re-let it. In this instance, it is more likely that you would have to pay your former tenant damages.

Commercial lease surrender

If the situation cannot be resolved without the tenant leaving the property, you may be forced to execute a lease surrender. This is also known as a ‘surrender and acceptance agreement’ or ‘lease termination agreement’.

A lease surrender involves you and your tenant agreeing to end the lease prior to the officially stated lease expiration. This may be the best situation if the tenant wishes to vacate the property and end the lease.

Ideally you will be able to settle any issues with your tenant without requiring the services of a solicitor or going to court. It is advisable to make use of specialist landlord and tenant services in order to resolve the situation amicably.

At Martin Slowe, we are experts in commercial property management. We specialise in rent reviews, lease renewal services and lease surrender. In extreme cases we also provide an expert witness service to arbitration and mediation proceedings.

If you are struggling with a commercial tenant not paying rent and need advice, get in touch with our team of landlord and tenant service experts. With more than 50 years of industry experience, we will be happy to help you resolve any issues you may be having.

The post Commercial tenant not paying rent?: What you should do first appeared on Commercial Property Management London | Martin Slowe.

If you are considering purchasing or developing a commercial property, you might want to consider a joint venture investment.

Joint venture investments are a popular means of funding, because they benefit all parties concerned, maximising available resources while spreading the risk. It is nonetheless wise to consider the ins and outs of a commercial joint venture before making the investment.

A commercial joint venture can include several stakeholders, who pool their resources in order to collaboratively manage a property development project. The contributions that stakeholders bring to the table can be anything from raw capital, a specialist skill set or other resources.

Commercial joint venture stakeholders may be:

1. Investors
2. Landowners
3. Property developers
4. Funders

Joint venture investment: different types

Before entering into a joint venture investment on commercial property, first consider the most common types of property venture and decide on the one that best suits your means, abilities and situation.

Profit share joint ventures involve several parties funding a commercial development together. When the project is complete, the profit is then divided into shares which are split between all of the parties involved according to the amounts agreed beforehand.

By contrast a fixed interest joint venture commonly involves parties who bring different resources to the venture. For instance, one party may fund the project and another may use their skills to design, plan, develop or manage it.

Because the means of contribution in a fixed interest joint venture are more varied, there is more scope for those who want to make a commercial venture, but lack the capital necessary for a profit share.

Joint venture investment: is it right for me?

Joint venture investments are more suited to certain developments than others. If your project is small, the cost of drafting a complicated joint venture with a solicitor makes the profit margin small or nonexistent. In such cases, it just isn’t worth it.

Equally a very large and complex development may be too difficult to manage without a very large group of investors. It will also require a lot of expensive legal negotiation to ensure that all parties are satisfied that their rights and funds are protected.

Joint venture investment: what to do beforehand

Before embarking upon a joint venture investment in commercial property, there are several steps that you should take in order to safeguard your interests.

1. Decide whether you want to be part of a profit share or fixed interest joint venture investment
2. Make sure that you are happy to work with all parties concerned
3. Clarify the roles and responsibilities of each party within the project
4. Agree on profit shares and how they will be distributed once the project is complete
5. Secure the venture with a contract

Once you and all the other investors have agreed on all of the above to your satisfaction, a solicitor then draws up a binding legal contract to ensure that everyone fulfils their obligations.

If you’re considering a joint venture investment and require any information or professional advice regarding commercial property, just give us a call and one of our talented team will be happy to help you.

The post Joint Venture Investment: How can it be used to buy commercial property? first appeared on Commercial Property Management London | Martin Slowe.

For centuries in the United Kingdom, Quarter Days have traditionally been considered those upon which debts, such as rent, are settled. The dates of Quarter Days are:

1. 25th March (Lady Day)
2. 24th June (Midsummer Day)
3. 29th September (Michaelmas)
4. 25th December (Christmas Day)

Although many landlords use the traditional Quarter Days for the purposes of collecting rent and service charges, it is also common nowadays for landlords in the UK to use the first day of the months of January, April, July and October as a more modern alternative.

Quarter Rent Days: Commercial Rent Arrears Recovery

If you are a landlord who uses the Quarter Rent Day system, you may also wonder when you are entitled to begin the process of recovering arrears if your tenants do not pay their rent or service charges by the due date.

There is a common misconception that a landlord cannot recover overdue rent without a court order. However, landlords can recover debts without needing to go through the time and expense of acquiring a court order, through the terms of the Commercial Rent Arrears Recovery procedure.

Commercial Rent Arrears Recovery (CRAR) was introduced as part 3 of the Tribunals Courts and Enforcement Act of 2007. It can be used to recover rent and VAT in commercial premises, but not service charges, insurance or any other type of payment.

In order to use CRAR:

1. You must have an existing (i.e. not terminated) rental agreement or lease in place
2. The rent must be seven days in arrears
3. A seven days’ notice of enforcement (not counting Sundays and bank holidays) must have been sent to the client

Once all of these factors are in place, certified enforcement agents will enter the premises and take control of the tenant’s goods. These will either be left under a controlled goods agreement (if a payment plan has been formally agreed) or removed until the areas are paid.

It is possible to shorten the seven day notice period if you suspect that the tenant will remove goods to prevent the enforcement agents from taking them. In the event that the goods do need to be sold, you must give the tenant seven days notice of sale.

Should you need to recover your property as well as the unpaid rent, ensure that you do not forfeit your lease until after the CRAR process, as CRAR can only take place under a valid existing lease.

If it is more important for you to recover the property immediately than to recover the arrears, you are not compelled to make use of CRAR. The date at which you can legally recover the property is set out under the terms of the lease, and it is often 21 days after the Quarter Rent Day.

The post Quarter Rent Days: What are they? first appeared on Commercial Property Management London | Martin Slowe.

Commercial property deed restrictions

One of the most important features of a commercial property deed is that it contains restrictions for the use and upkeep of the property, which must be adhered to by the landlord and any commercial tenants.

As in leasehold residential properties which divide maintenance costs and responsibilities, the commercial property deed serves as a means to establish rules for the maintenance of the property’s common areas.

Common areas include buildings or pieces of land that are shared by different individuals, such as car parks, to which all individuals have a legal right and must therefore be jointly responsible for any upkeep – whether they are carrying out maintenance themselves or employing a property management service to oversee all necessary tasks on their behalf.

This is often referred to as a common area maintenance (CAM) regime, and it helps to make sure that the commercial property is being maintained to a high standard and that all property owners are paying their fair share of expenses.

If you feel as though your property is not being maintained to the correct standard, that your tenants are not fulfilling their maintenance obligations, or both, it is wise to consult a solicitor.

Commercial property deed: how to change one

The restrictions set out in a commercial property deed generally apply to all successive owners and tenants, not simply those who set it out. If you want to change the existing commercial deeds of a property, check that you can do so before buying it.

If you are renting or leasing your commercial space, ensure that you review the deed restrictions before doing so. You must make sure that you are upfront with your tenants and that you are personally aware of the responsibilities of all parties.

Of course, you can also use restrictions to limit your tenants’ use of the property should you desire to do so. Should the matter require expert assistance to help with negotiations,

it is advisable to seek out professional landlord and tenant services to resolve any disputes quickly and smoothly.

Contract for deed commercial property

You may also encounter the term ‘contract for deed’ in relation to renting or leasing commercial property space.

A contract for deed is a contract for land used specifically for commercial purposes. The process and legalities of acquiring a contract for deed commercial property are as follows:

1. The buyer submits the down payment (if necessary), then takes possession of the property and begins to make payments on it
2. Until the property is paid off, the seller retains the title to the property
3. Once the buyer has paid in full, the seller is obliged contractually to give them equitable interest in the property while retaining the legal title

If you would like more information regarding a commercial property deed and its contents, get in touch and our team will be happy to answer your questions.

The post Commercial property deed: What does it contain? first appeared on Commercial Property Management London | Martin Slowe.

Commercial building plans are specifically designed to accommodate the needs of a business, which often differ greatly from those of a residential property.

Modern commercial building plans

A commercial plan is often designed as a free standing building which contains a range of businesses or other bodies. Almost all are designed with more than one business in mind and some commercial building plans factor in a whole range of different businesses and different purposes. For this reason, commercial building plans are often more complex and varied than residential building plans.

A commercial building plan may be of any design, style or size, depending on the designer and the intended function. Small commercial office building plans might accommodate only one or two commercial units, such as retail or other shops, whereas a larger plan might cover a whole block of offices to provide space and facilities for dozens of tenants.

Depending on the size of the building in question and how many separate commercial units it is designed to contain, the commercial building plans may include one or even several levels. It may also incorporate communal commercial spaces, such as car parks, which may be used by all tenants jointly.

Mixed-use commercial building plans

Mixed-use commercial building plans are used for buildings that are designed for both commercial and residential purposes.

Some of the most famous and iconic commercial buildings in the UK incorporate residential space, including The Shard in London, which contains 13 floors of private apartments in addition to its office and hospitality floors.

In terms of plans, mixed-use commercial building plans therefore present different challenge, but they also present many new opportunities.

A building that can provide for both commercial and residential appeals to a more diverse occupier group and is therefore more sellable. The property space itself is also more flexible than a traditional commercial building – an advantage, as it offers lessees the chance to adapt to changes in workplace structure and layout, as well as customising their workspace to suit their business needs.

Commercial building plans: help and guidance

If you have commissioned commercial business plans for the purpose of renovating a dilapidated property, it is advisable to employ a professional building surveying service to ensure that all goes smoothly.

A professional surveyor will assist you in matters of design, specification and contract administration from the very beginning of the project until its successful completion. They will also conduct measured surveys. These are representations of the structural elements and features (such as floor plans and elevations) of the finished commercial building.

If you would like to know more about the specialist commercial building plans surveying service we offer at Martin Slowe, get in touch with a member of our talented team and we’ll be only too happy to advise you.

The post Commercial building plans: What do they include? first appeared on Commercial Property Management London | Martin Slowe.

The versatility of office space in comparison to traditional residential properties also adds to its desirability. Large, open plan spaces are easy to convert and renovate without the restrictions common in period buildings, making them attractive prospects for those who do not mind carrying out a little renovation work.

The popularity of former commercial properties also reflects the growing trend for industrial interiors, visible pipes and wiring and brutalist features, as well as the increasing interest in live-work space across London and in other urban warehouse rental projects.

Of course there are things to consider before buying a commercial property to convert to residential. If the property has not already been officially given residential status, the building’s insurance will not cover residential occupants.

This is a legal liability and therefore the building’s status must be changed – you can’t just buy the property, renovate it and move in, as you would with an existing residential house or flat.

Therefore, if you want to convert a commercial property to residential in order to live in it, there are a few steps you need to take first.

Commercial property change of use to residential

If a building is still a registered commercial property, you may need to obtain planning permission before converting it into a residential space. This is definitely something to check before buying, as sometimes commercial property for sale already has planning permission for a conversion to residential.

In order to obtain planning permission you will need to apply to your council’s local planning authority (LPA). The application can cost anywhere from £80 to £200.

Bear in mind that if you go ahead with any building work without having permission, you may find yourself facing the financial and legal repercussions of a planning breach – something to be avoided.

What are Permitted Development Rights?

However, if you are planning on converting a commercial property, planning permission is not always necessary. The 2013 Permitted Development Rights (PDR) statute states that some types of commercial property do not need planning permission before being converted to residential.

Types of building covered by Permitted Development Rights may include:

1. Offices
2. Properties designed to carry out light industrial processes, such as factories, workshops and warehouses
3. Shops and other properties where the size of the premises is no larger than 150 square metres

Make sure you know exactly what the law stipulates with regard to your property before beginning renovations.

You should also ensure that you seek prior approval from your local council before completing any major works, even if you positively determine that no planning permission is necessary. This should not cost more than £200.

Prior approval for renovation may come with conditions specific to a former commercial property, such as a limited time frame within which to complete all the building works. This depends on the type of commercial property you are converting.

If you need information or professional advice regarding commercial property, please get in touch and one of our talented team will be only too pleased to help you.

The post Can you live in a commercial property? first appeared on Commercial Property Management London | Martin Slowe.

The responsibility for removing any hazards and arranging any necessary repairs to the property’s electrical system therefore falls to you as the landlord, not the tenant.

Any repairs or upkeep of electrical appliances used within the property may fall to the landlord or the tenant, depending on what is stipulated under the terms of the commercial lease.

Prior to signing a lease, you should discuss what your tenants will be responsible for and what you will maintain.

Commercial electrical safety: relevant legislation

If you need to determine your exact responsibilities for electrical maintenance and safety as a commercial landlord, there are several relevant pieces of legislation that apply to you.

The Landlords and Tenants Act of 1985 contains clauses on electrical safety in rented commercial property. According to Section 8, Subsections a) and b) of the Act, the electrical installation in the property must be:

1. Safe at the beginning of the tenancy
2. Maintained in a safe condition for the entire duration of the tenancy

There are also two other relevant pieces of legislation that apply to electrical safety in commercial properties – the 1957 Occupiers’ Liability Act and the 1984 Occupiers’ Liability Act.

These stipulate that landlords have a duty of care towards anyone who visits their property, as opposed to merely the tenant. This is especially important in commercial properties such as shops, restaurants or office buildings where large amounts of people may be visiting on a daily basis.

If you fail to adhere to electrical safety guidelines for commercial properties and someone is injured as a result, you can be prosecuted under the terms of the two Occupiers’ Liability Acts regardless of whether the individual was at the property legally or they were trespassing.

Commercial electrical safety: Electrical Condition Reports (EICR)

In order to ensure that you are compliant with the laws stipulated by the 1985 Landlords and Tenants Act, it is advisable to have your property surveyed, with an Electrical Condition Report (EICR) carried out on it before you let to any tenants.

You must hire a registered electrician to perform the EICR. They will let you know if anything needs changing or improving in order to comply with the Act before the property is let.
Periodic inspection and testing to ensure commercial electrical safety
As the landlord of a commercial property it is your responsibility to arrange periodic inspection and testing of the electrical system. These inspections must be carried out by a registered electrician at least every five years and ideally at each change of occupancy.

For more information regarding the standards to which your electrical installations should be maintained, consult the Health and Safety Executive (HSE) guidelines on electricity and the law.

Commercial electrical safety: rewiring

If – following an unsatisfactory test or simply to update the system – you need to rewire any electrical installations on your commercial property, it is your responsibility as a commercial landlord to make sure that this does not present a danger to your current and future tenants.

The safest and best solution is to ensure that you remove all redundant wire created by the rewiring process. If this is not possible, you must ensure that the redundant wiring is disconnected permanently from the electrical supply inside the commercial property.

At Martin Slowe we have more than 50 years of experience in property surveying and ensuring health and safety compliance. Get in touch and we’ll be happy to provide you with the independent advice you need on electrical safety.

The post How is a commercial landlord responsible for electrical safety? first appeared on Commercial Property Management London | Martin Slowe.

The process of a valuation survey for commercial property differs significantly from a residential property valuation, which tends to focus almost exclusively on calculating a single monetary value to reflect the property’s value.

Owing to the wide variety of commercial businesses, commercial property valuation requirements differ considerably from company to company and as a result the valuation of a commercial property will depend on the property surveyed.

A valuation survey for a commercial property will typically include:

1. The condition of the property
2. The location of the property
3. The size of the property
4. The existing covenant strength of the tenant
5. The current economic conditions and their impact on the value of the property
6. Demand

What is a valuation survey: different types of commercial property survey

There are three main types of valuation survey conducted on a commercial property:

Building surveys

A building survey is designed to provide a comprehensive review of the building’s physical condition, detailing its current state including any problems and estimating what maintenance might be required in the future.

The building materials will also be listed in detail and the presence of any hazardous materials that commercial tenants need to take caution with such as asbestos will be declared.

The purpose of a building survey is to establish the nature of maintenance for which the next commercial tenant will be liable. As the commercial tenant is typically responsible for any repairs to the building, this is vital to ensure a fair negotiation between both landlord and tenant.

Schedule of condition

A schedule of condition documents the state of the commercial property building on a specific date. This is to provide evidence of whether or not a tenant is liable to pay for specific damages.

For instance, if the contract specifies that a tenant must ensure that the property is in its original condition (i.e. the condition it was in when their lease began) a schedule of condition provides evidence if they have damaged the building in some way, thereby entitling the landlord to charge them fairly for repairs.

Schedule of dilapidations

The schedule of dilapidations is undertaken at the end of a commercial lease term in order to evaluate the condition of the property and clarify the obligations of the former tenant for repairing any damages. The schedule of dilapidations helps landlord and tenant to agree on dilapidation costs without the need for either party to seek legal assistance in settling the matter.

If considerable dilapidation has occurred, an independent third party – usually a building surveyor – may be required to negotiate on the landlord and/or tenant’s behalf. The building surveyor must be highly trained and experienced in addition to possessing full liability insurance, in order to safeguard the interests of their client.

What is a valuation survey: what to do if you need one

If you are seeking expert professional guidance regarding a commercial property valuation survey, our team of RICS-qualified valuation specialists can help you.

At Martin Slowe we have more than 50 years of experience in valuing commercial property. Get in touch and we’ll be happy to provide you with the independent advice you need.

The post What is a valuation survey? first appeared on Commercial Property Management London | Martin Slowe.

Most commercial tenants have the right to a commercial lease renewal under the The Landlord and Tenant Act 1954.

A commercial property lease generally lasts five years and the right to renew a business lease is granted in order to prevent tenants from having to vacate the property at the end of their lease term without the chance to renew the lease.

It is possible to exclude the provisions of the Act within a commercial lease – an act which is now a far simpler process than it has historically been.

No court order is required and as the landlord of the property you are only required to complete the relevant forms to exclude security of tenure for a business tenant.

As such, potential tenants wishing to lease a business premises within your portfolio for more than five years are likely to want to survey the property and also check their contract to determine if security of tenure has been excluded and if their commercial tenant rights under the Act still apply.

Even if you have not specified an exclusion in the commercial lease, there are certain situations in which a business tenant can lose their right to protection under the Act. The most significant is a failure to occupy the business premises, as tenants’ rights in commercial property depend on continued residence.

This does not necessarily have to mean a total lack of occupation (i.e. the building is empty), as it can also refer to a tenant’s failure to occupy the premises for their designated commercial purpose.

The 1954 Landlord and Tenant Act is designed to provide a commercial tenant rights to protection and security when they are in the process of renewing a business lease. Failure to occupy the premises indicates that the terms of the Act should not apply to the present tenant.

Commercial lease renewal process: what does it involve?

In many cases, pursuing a formal commercial lease renewal is not necessary. The lease continues automatically if the statutory renewal process detailed in the Landlord and Tenant Act 1954 is not triggered by lease expiry.

The tenant is therefore entitled to remain in the commercial premises on the same terms as before.

Nevertheless, either you or your tenant may wish to instigate the renewal process for their own benefit. If local rents are rising, it is in your interest to renew. Likewise if they are dropping, the tenant can instigate renewal to renegotiate the terms of their current lease or move their premises elsewhere.

When a tenant wishes to instigate a commercial lease renewal, they must provide you with sufficient notice – between six months and a year.

The lease renewal notice should include:

• A commencement date for the suggested new lease
• The desired rental figure
• The suggested length of the lease
• Any other terms that may be relevant to the lease renewal

Once you have received notice from your tenant that they wish to instigate a lease renewal, you have a two month window in order to negotiate terms or dispute the terms of the proposed lease if necessary.

If required, any lease renewal discussions may be overseen by an industry expert in lease renewal negotiation in order to ensure the most favourable outcome for both you and your tenant.

If you are seeking advice in negotiating a commercial lease renewal, get in touch our team of landlord and tenant service experts. With more than 50 years of industry experience, we will be happy to help you.

The post Commercial lease renewal: What does it include? first appeared on Commercial Property Management London | Martin Slowe.

What is the purpose of a commercial rent review?

When a commercial property is being leased, it is in the landlord’s interest to increase the rent in order to maintain the commercial viability of the lease; conversely, it is in the tenant’s interest to keep the cost of the lease low.

Negotiation over the rent cost is therefore necessary in order to satisfy both parties. These negotiations – known as rent reviews – are formally arranged in advance.

How often is a commercial rent review?

Rent reviews first became common practice after the Second World War and were initially conducted every seven or 14 years. Since then commercial leases (and residential ones) – have shortened considerably and rent reviews have decreased proportionally.

Most modern leases have rent reviews at intervals of between three and five years. Choosing the ideal length for a lease term should be a matter of careful consideration for you as a commercial landlord, as it involves weighing up two factors:

1. The cost of the rent review and how often you wish to bear that expense
2. The advantage of a potential increase in the price of rent

You should clarify the lease term with your prospective tenant before signing the commercial lease contract.

The lease payment itself is almost always quarterly, on four Old English quarter days:

1. March 25th
2. June 24th
3. September 29th
4. December 25th

Lease payments do not impact the regularity of commercial rent reviews.

Commercial rent review: can rent increase during a lease term?

Whether rent can legally increase during the term of a commercial lease agreement without a rent review is dependent on the terms and conditions outlined in the initial commercial lease agreement.

Rent review provisions are almost always included in commercial lease terms of more than five years, with the lease documentation specifying the exact terms.

Other things to consider about a commercial rent review

When a commercial rent review is pending, there are a few things to bear in mind:

1. Many leases have an upwards-only provision incorporated in their rent review. This means that the rent can only ever rise; even if the market rate has dropped, the rent will not decrease to match it
2. The rent review clause should make provisions in the event of any disagreement or dispute between you and our tenant arising during a commercial rent review. If negotiations are fruitless, the clause may call for an experienced third party such as a commercial property surveyor or arbitrator to value the property and set a lease rate
3. Any change in rent can be backdated to the initial review date. If commercial tenants dispute an increase for several months or years, only for a third party to raise the price of rent, they will have to pay the difference, plus interest

At Martin Slowe, our team of landlord and tenant service experts have more than 50 years of experience in the commercial property industry.

If you’re a commercial tenant or landlord with any questions or concerns about commercial rent review, get in touch and we’ll be happy to advise or help you to find a solution.

The post Commercial rent review: What does it include? first appeared on Commercial Property Management London | Martin Slowe.

If handled without sufficient knowledge and experience, negotiating terms for a commercial lease that suit both the landlord and the tenant can be problematic, with disputes over factors such as the duration of the lease, repairs or maintenance.

The RICS Code for Leasing Business Premises in England

The Royal Institution of Chartered Surveyors (RICS) Code for Leasing Business Premises is designed to ensure that commercial leases are fairly drawn up and adhered to.

The Code is especially useful for a small businesses looking to lease business premises to guarantee the best possible deal.

The Code was drawn up in a collaboration between the representative bodies of landlords and tenants in the commercial property industry.
Although industry compliance is supported by the government, is not mandatory and as a result not all landlords offer leases compliant with the RICS Code.

What does the Code for Leasing Business Premises contain?

The Code for Leasing Business Premises is comprised of three parts:

1. The Landlord Code
2. The Occupier Guidelines
3. A model Heads of Terms document that can be used when leasing business premises

The Landlord Code guidelines are

1. Lease negotiations – when a landlord makes an offer to a prospective commercial tenant they must clearly state the rental fee, the length of the term, any break rights, and the security of tenure
2. Rent deposits and guarantees – any rent deposit proposals, their amount and pay arrangements should be clearly stated in the lease terms
3. Length of term, break clauses and renewal rights – the length of term must be clear and tenants must be allowed to exercise break clauses provided that they are up to date with rent, give up occupation and leave behind no subleases
4. Rent review – the rent review process can be started by tenants and landlords. Rent reviews should be clear and landlords should offer alternatives to their proposed option for rent review on request
5. Assignment and subletting – under the terms of a lease, a tenant should be able to assign the whole of the premises and not refer to any specific circumstances for refusal. Subletting should be the market rent at the time of subletting
6. Service charges – during negotiations a landlord should provide prospective tenants with their best estimate of outgoings under the lease, such as service charges and insurance payment costs
7. Repairs – a tenant should be obliged to return the premises in the same condition as at the beginning of their lease unless otherwise stated
8. Alterations and changes of use – tenants should be allowed to make non-structural changes to the property without the consent of the landlord unless they could affect other services or systems in the building
9. Insurance – the insurance policy terms must be reasonable and placed with reputable insurers and landlords should provide full insurance details upon request
10. Ongoing management – landlords should deal with tenants and guarantors openly and notify tenants of any dilapidations six months before the date of termination

Things to consider before leasing business premises

If you are considering leasing business premises, RICS advises that you study the Code in order to be properly informed with regards to your rights and what you can reasonably expect from a RICS-compliant lessor.

Lessors should likewise take the time to read the Code and other professional statements made by RICS to make sure that they adhere to high standards of compliance.

In addition to studying the Code for Leasing Business Premises, RICS recommend that business lessors and leaseholders seek expert consultation and advice.

Contact us and our specialist team will be happy to answer your questions about commercial lease terms, or any other aspect of commercial property management.

The post Code for Leasing Business Premises: What is it? first appeared on Commercial Property Management London | Martin Slowe.

1. They are overdue in paying their rent
2. The landlord is proceeding to take steps to reclaim the rent
3. Of any potential legal proceeding should the rental arrears remain unpaid

There are varying kinds of rent arrears letter, depending on the stage of arrears the tenant is at. It is important for all parties to know what the letters may contain and when they can legally be sent.

What happens before a rent arrears letter is sent?

There may be valid reasons why a commercial tenant has not paid their rent, such as administrative difficulties with their bank, an issue with funds or a simple mistake regarding the payment due date.

Prior to entering into formal rental arrears proceedings, a landlord will send rent reminder letters.

The stages of rent arrears

Commercial rent is typically paid in advance on four agreed Old English Quarter days:

• March 25th
• June 24th
• September 29th
• December 25th

Occasionally a commercial lease agreement will require a monthly rental payment, but this is rare.

Payment may sometimes be made earlier than these dates. These payment dates are agreed in the terms of the lease. If the rent is even one day overdue, the tenant is deemed to be in arrears.

There are several different stages in the rent arrears process. Legally, a letter must be sent to the tenant at each stage to keep them fully informed regarding rent arrears proceedings:

1. Letter 1 – a week after the agreed quarter date, a reminder letter will be sent to the tenant informing them their rent is in arrears.The tenant will also receive telephone calls and/or emails from either the landlord or the company who manages the commercial property on behalf of the landlord, to address and discuss the arrears and the tenant’s intention to pay.
2. Letter 2 – 10 days after the date of the first letter, a second letter will be sent to the tenant. This will reiterate the contents of the first letter.Telephone calls and/or emails will continue at this stage.
3. Letter 3 – after a further 10 days, a third letter will be sent to the tenant, stating the arrears will move into legal proceedings if the tenant continues to fail to pay.Telephone calls and/or emails will continue at this stage.If the tenant informs the landlord or the property management company of a valid reason they are struggling to pay the rental arrears, arrangements may be made to allow the tenant to pay the funds in instalments, or offer a reduced rent for a fixed time.  If the tenant does not respond or make payment after three rent arrears letters have been sent, the arrears will be referred to a bailiff to recover the outstanding amount.

Once the arrears have been referred to a credit collection company, the tenant is no longer able to pay the landlord or the property management company directly. All communication and payments must be made directly to the credit collection company.

Commercial Rent Arrears Recovery (CRAR)

In some instances, commercial landlords are able to recover rent arrears without going to court using a process known as Commercial Rent Arrears Recovery (CRAR).

Introduced on 6th April 2014, the process replaced Distress for Rent and can only be utilised by certified enforcement agents.

If your commercial tenant is in rent arrears, our specialist landlord and tenant services can help to resolve any disputes that may arise. Contact us and we will be happy to assist and advise you.

The post Rent Arrears Letter: What do they contain? first appeared on Commercial Property Management London | Martin Slowe.

1. Overdue
2. Paid after the service period

In some contexts the two different usages may be differentiated through language. A payment ‘in arrear’ refers to a legitimate retrospective payment, whereas to be ‘in arrears’ refers to the more negative overdue payment.

Only recurring payments such as rent or wages can be described as ‘in arrears’. The term is not applicable to a one-off payment.

Paid in arrears: overdue payment

An overdue payment – known as a payment in arrears – occurs when a customer does not pay for a service or product during the time frame specified by the vendor.

Overdue payments can have consequences such as:

1. A reduction in credit
2. An increase in interest rate
3. A reduction in payment terms

Businesses in particular should avoid making overdue payments where possible as this may establish a negative relationship that may impact later financial dealings.

In the first instance of an overdue payment, check to see that invoices are being received. Also clarify the payment terms on the invoices to ensure that there are no ambiguities regarding payment date.

It is also important to make sure that the accounting system is running smoothly and that it is correctly recording payments. Digital errors can cause financial setbacks and waste time.

Once an overdue payment is established as an error on the part of the person responsible for making the payment, penalties can be enforced such as charging interest after a certain amount of time without payment. This is often an effective way to prevent overdue payments in the future.

Paid in arrears: payment after the service period

Not all payments in arrears are cause for concern. If someone is billed in arrears, this simply means that the product or service provider has not charged the individual until after the end of the service period.

Therefore it is possible to consistently pay in arrears without those payments being considered late. Payments after the service period do not warrant a penalty or any further action.

Billing in arrears is unusual in the context of landlord-tenant relationships, as landlords normally request payment for rent at the beginning of the service period (i.e. for the following month), but it is a common procedure in businesses.

What to do if a commercial tenant is in arrears

How you proceed with a tenant who is in arrears will depend on your preferred outcome. You should consider factors including:

1. Is the tenant in financial difficulty? – If they are struggling to the extent that they have an insolvency arrangement in place, or they may shortly enter into one, you may be further delayed in receiving any outstanding funds
2. Do you want the tenant to remain in the property? – If you do, it’s worth discussing payment options with the tenant to help them pay the funds which are in arrears. Consider if you could allow the tenant to pay the funds in instalments, or offer a reduced rent for a fixed time until their financial situation improves
3. Would you like the tenant to vacate the property? – If so, you could consider forfeiting the lease. Once the lease is forfeit, you can pursue the tenant for the arrears

At Martin Slowe we have more than 50 years of experience in commercial property services. Get in touch with us and our team will be only too pleased to provide you with specialist advice.

The post What does paid in arrears mean? first appeared on Commercial Property Management London | Martin Slowe.

A lack of preparation and understanding at a commercial property auction can have unpleasant consequences for the inexperienced. Nevertheless it is quite possible that a commercial auction will ensure that you receive the best price for your property, or help you to find a real bargain.

What makes a commercial property auction unique?

Most properties sold for auction are those that would not command a high price when sold in the traditional manner. If you have a property that needs extensive refurbishment, it will almost certainly fetch a better price at auction than it would on the commercial housing market.

It is also beneficial to hold an auction for properties that are hard to value, due to their uniqueness. A standard estate agent may not be capable of assessing the full merits of your property.

In situations like this, an auction can provide an opportunity for specialists from commercial fields to come together and judge the property on the qualities that they know best, providing a good outcome for both buyer and seller.

It is typically more common for business owners to want to renovate a property than residential buyers. Due to the highly specialised needs of certain businesses, commercial auctions are an excellent opportunity for business owners.

Auctions are also a remarkably fast way to sell property. The buyer is obliged to pay 10% of the property’s value upfront and has a month to pay the remaining monies. This eliminates lengthy communications between estate agents and solicitors.

What are the advantages & disadvantages of buying or selling at a commercial property auction?

There are many obvious advantages to buying and selling property through a commercial auction. However, there are also disadvantages to be considered.

Commercial auction advantages for the buyer

1. Experienced property buyers can find property at a price they can capitalise upon
2. Buyers looking to buy property to renovate are likely to find something that suits them
3. As all potential buyers must register to attend an auction, competition is likely to be smaller than on the traditional housing market

Commercial auction disadvantages for the buyer

1. The process of a commercial auction can be adrenaline-fuelled – ensure that you have another person, especially one skilled at bidding, to stop you from making a costly impulse buy
2. Once the auctioneer drops the gavel, you can’t change your mind about the property – should you try to withdraw from the sale, the seller can sue for the full sale price
3. Commercial auction advantages for the seller
4. If you need to sell your property quickly, a commercial auction is the ideal way to do it
5. As commercial auctioneering is a competitive process, the chance of getting a good price for your property is increased as buyers seek to outbid each other

Commercial auction disadvantages for the seller

1. The fees of auctioning your commercial property are likely to be higher than those of selling a property traditionally through an estate agent
2. There is no guarantee that your property will sell at auction
3. You may not be entirely satisfied with the price your property reaches and once the auction is in process you have no control over this

How to prepare to buy or sell property at commercial auction

Before you buy or sell property at commercial auction, there are a few factors to take into consideration:

1. Prior to the auction, if you are selling make sure that you market your property well
2. If you are buying, make sure that you visit the property you are interested in beforehand
3. Contact the professionals – commercial auctioneers or commercial surveyors will be able to give you an idea of the value of a property
4. Bear in mind that once the property is sold at auction, both the buyer and the seller are legally obliged to go through with the sale. Any qualms that either party might have are irrelevant

For advice on purchasing or selling commercial property at auction, get in touch with our team who will be happy to advise and assist you.

The post How to prepare for a commercial property auction first appeared on Commercial Property Management London | Martin Slowe.

The precise cost of a commercial property investment depends on the means by which the investor enters the property market.

Before conducting further research, consider regional prices for:

1. Direct investment
2. Direct commercial property
3. Indirect property funds

It is also important to take into consideration the type of commercial property you are intending to invest in.

Types of commercial property

There are three main categories of commercial property:

1. Commercial office properties include space beneath residential buildings such as flats and purpose built office buildings
2. Commercial retail properties include warehouse space dedicated to retail operations, shops on the high street, shopping centres and supermarket space
3. Commercial industrial properties include warehouses and garages, industrial estates and in some cases factory buildings or complexes

Although they differ widely in terms of size, location and features, all are spaces purposefully designed in order to accommodate a commercial business.

2018 commercial property prices in the UK

The 2018 UK commercial property market is diverse for landlords. Current footfall declines with the retail sector are ongoing, leading to decreasing rental fees from commercial retail spaces. There is no doubt that commercial property in the UK retail sector is currently losing value, due to the financial difficulties that many high street shops are facing.

There is no regional variance in this aspect of the 2018 commercial market – retail decline is nationwide and with established retailers such as Marks & Spencer, House of Fraser, Debenhams and New Look in the midst of large-scale closures, this should come as no surprise. With negative near term capital value projections for retail in every UK region, the commercial market for retail properties is at a ten-year low.

By contrast, there is a rising demand for industrial space across the whole of the UK and for the first time since 2016, there was a rise in tenant enquiries for commercial office properties. The prices of industrial space in particular are stable and their near term rental projections healthy.

For a statistical analysis of regional commercial property prices in the UK, economists from The Royal Institution of Chartered Surveyors (RICS) publish a Commercial Market Survey every quarter. This provides a detailed breakdown of the current commercial market by region, with accompanying figures.

The London commercial property market

According to RICS’ most recent survey, ‘London continues to return the most pessimistic feedback’ of any region related to the commercial property market. Rents are predicted to drop for secondary office space (in contrast to the rest of the country) as well as for retail.

However, the commercial property picture in the capital isn’t entirely pessimistic. Reports on the rent of prime office space in London are relatively positive and the rent of London industrial space is also growing steadily.

How do regional initiatives affect the commercial property market?

There are also a range of regional initiatives available to commercial property buyers, including:

1. Business Improvement Districts (BIDs) – these provide additional services to local businesses. Placemanagement.org offers a comprehensive map of UK BIDs
2. Enterprise Zones – designed for the purpose of business development and job generation. Enterprise Zones offer financial incentives and reduced restrictions. Communities.gov.uk provides a list of UK Enterprise Zones and their focuses
3. Local Enterprise Partnerships (LEPs) – partnerships between local businesses and local authorities. Lepnetwork.net provides a list of UK LEPs

It is advisable to research the availability of each of these initiatives prior to investing.

At Martin Slowe Property Services Limited we have been providing an expert commercial property service since 1962.

With more than 50 years’ experience in industry, we are well-placed to advise you on all aspects of commercial property management, landlord/tenant services and more.

For more information or specialist advice, please get in touch with our team.

The post How do commercial property prices in the UK vary by region? first appeared on Commercial Property Management London | Martin Slowe.

It is far more common for businesses to lease their premises. Nevertheless, there are many advantages of managing a freehold commercial property as opposed to a leasehold property.

These include:

1. The freeholder benefits from lower long-term costs
2. The freeholder may make money when they come to sell the property, thanks to an increase in its value
3. The freeholder has total control over the property and can renovate as necessary

Along with these advantages, however, freehold commercial property managers have certain factors to take into consideration.

Freehold commercial property use and development

In comparison to leasehold properties, freeholds benefit from a lack of restrictions in relation to use and development. Nevertheless, freehold commercial property is still subject to restrictions put in place by the Local Authority.

Prospective buyers should conduct a Local Authority search in order to find out any restrictions that might interrupt their business or incur penalties. The Local Authority will also need to grant consent for change of use.

Likewise, it is important to buyers to obtain building regulations and planning permissions from the Local Authority for any changes they intend on making to the commercial property prior to purchase.

As the owner of a freehold commercial property, you will naturally be exempt from any property use or development restrictions imposed by a landlord.

Stamp duty on a freehold commercial property

The buyer of a freehold commercial property must pay considerably higher rates of stamp duty land tax (SDLT) than they would on a comparable leasehold property. The stamp duty land tax on a commercial property will also be considerably higher than tax for a residential freehold.

A commercial property valued over £150,000 incurs increasing portions – or ‘considerations’ of SDLT. USe an SDLT calculator to determine the amount of SDLT payable on a freehold commercial property.

EPCs for a freehold commercial property use

As of April 2018 it is against the law for a landlord to let or lease a commercial property with an energy performance rating of less than E. If, as a freeholder, you intend to lease your commercial property space, you must take the necessary steps to ensure it is energy efficient enough for this to be feasible.

It is compulsory for commercial property owners to provide a valid energy performance certificate upon sale of the property; potential freehold commercial property buyers should see that they obtain one from the seller.

Freehold commercial property health and safety considerations

As a freeholder, you will be responsible for the property’s upkeep and for fixing any damages. You should take into consideration:

Service charges

If you are renting your property to a business, as the landlord you can recover maintenance and repair costs from them through commercial service charges such as:

1. General repairs
2. Cleaning
3. Refuse and waste collection
4. Lighting
5. Heating
6. Air conditioning
7. Security

Fire regulations

Commercial fire regulations are the remit of one designated individual, known as the ‘Responsible Person’.

Their responsibilities include:

1. Risk assessments
2. Ensuring that anyone who uses the building is aware of safety risks
3. Putting in place all necessary safety measures
4. Safety training
5. Making plans in case of emergency

As the freeholder, ensure that you are aware of the Responsible Person if it is not you and make sure that they are carrying out their duties.

Insurance

Although it is always wise to be insured, owning a freehold commercial property makes it especially important to secure commercial property insurance in the event of any damage.

Commercial insurance policies can be chosen to cover:

1. The building
2. Contents
3. Acts of terrorism
4. Business interruption
5. Rent receivable
6. Stock and cash
7. Public liability cover
8. Employers’ liability cover

The post What special considerations have to be made when managing freehold commercial property? first appeared on Commercial Property Management London | Martin Slowe.

What are the differences between commercial property and residential property?

Investing in commercial property is an effective means of diversifying your investment portfolio, bypassing the high upfront costs, short leases and uncertainty associated with investing in residential property.

Commercial properties fit into one of three main categories:

1. Offices – spaces designed specifically for businesses, offices can be as a diverse as converted residential buildings and skyscrapers to purpose built office buildings
2. Retail – commercial retail property includes shops on the high street, shopping centres, supermarkets and retail warehouse space
3. Industrial – including purpose-built industrial estates, warehouses, garages, and manufacturing buildings such as factories

Commercial property is an attractive prospect for investors for a variety of reasons:

1. Commercial property investors in the UK benefit from long leases – generally between 8-15 years compared to six months to a year in residential properties. The guaranteed income of the lease means that commercial property represents a more stable investment
2. Due to the increased stability of commercial investments – with business tenants typically less likely to default on rental payments than residential tenants – lower interest rates are applicable

Prospective investors can enter the property market in a variety of ways:

1. Direct investment – this approach involves purchasing the entirety or a share of a specific commercial property, such as a high street shop. This is advantageous because it is a low-risk and low management option, but purchasing an entire property is rarely feasible for fledgling property investors
2. Direct commercial property (also known as ‘bricks and mortar’) funds – this involves investing in a portfolio of commercial properties that form a collective investment scheme, such as a unit trust. This has the advantage of making large commercial properties a feasible investment option for small investors as well as reducing the risk of purchasing a single property
3. Indirect property funds – this option involves investment in the shares of property companies. These possess high liquidity in comparison with direct investments and do not require high upfront costs

What should be considered before investing?

Profitable commercial investments

The economy has been forecast to grow by at least 1.5% both this year and in 2019 and the nervousness regarding UK investments since the Brexit vote has created a number of commercial investment opportunities for the entrepreneurial.

One of the main objectives of the upcoming Crossrail network is to provide improved travel connections between London’s business and commercial districts.

The value of commercial property around London’s Crossrail stations is expected to soar as a result of an extra 1.5 million people who will be within commuting distance of the capital, making property in these areas a viable investment.

Crossrail stations include:

1. Paddington
2. Bond Street
3. Tottenham Court Road
4. Farringdon
5. Liverpool Street
6. Whitechapel
7. Canary Wharf
8. Custom House
9. Woolwich
10. Abbey Wood

Although the rising house prices in the commuter belt provide the most obvious benefits to residential investors, those looking to invest in commercial or semi-commercial property will also find many opportunities to profit.

The launch of Crossrail has also created commercial property investment opportunities across the commuter belt, with towns such as Brentwood and Slough seeing steadily rising house prices that predict an excellent return on investment.

Stevenage is already well-connected with a direct line to King’s Cross and investment value reflects this with average house prices rising by nearly 60% over the past ten years – a trend which is expected to be reflected in commercial property prices.

The extension of the Great Northern railway line, which will connect it to the Crossrail network at Farringdon, only serves to increase the town’s desirability to investors.

The retail sector also presents a variety of appealing investment choices for investors of all sizes and budgets. The movement towards online retail has, surprisingly, served to invigorate two very different kinds of commercial property opportunity. It is only logical that it has raised the demand for retail warehouse space in order to facilitate online shopping and the value of this type of investment sees no sign of decreasing.

Despite a spate of recent high street store closure announcements by brands as large as Marks & Spencer, Next and New Look, the ownership and shares of flagship stores have increased in value.

It has been speculated that this is due to an increased need for a physical store in which to showcase a brand’s values against a backdrop of internet shopping. Purchasing a flagship on Oxford Street or Tottenham Court Road may be beyond the financial capability of most investors, however shares in such destinations are rising in value.

Potential commercial investment pitfalls

It is inadvisable to invest in a commercial property that requires extensive repairs as your first purchase. Minor  cosmetic updates are fine and should not be excessively costly, but if you intend to buy a run-down commercial property at a low market value, fully renovate it and sell it for a profit you will be competing with experienced property developers.

Even if you intend to retain the property in your portfolio after renovating it, the building costs of the project will likely be too high to represent a good overall investment.

Purchasing commercial property that is located in an area with which you are not familiar may also prove to be problematic. Remote property management represents a risk because your lack of expertise in the area in which your property is situated can be very costly.

Purchasing commercial property in another country – especially by direct investment – is an even more risky strategy, so as an investor it’s advisable to consider areas which are familiar to you.

What are the Commercial Property Landlord Responsibilities?

Once you have invested in a commercial property, you are responsible for upholding vital health and safety standards to ensure the safety of your tenants and their customers.

As a commercial property landlord, you are also responsible for adhering to industry regulations regarding fire, asbestos and energy performance.

Fire risk assessments in commercial property

Fire risk assessments on commercial properties must:

1. Be reviewed regularly
2. Be legally recorded if the premises employs more than four people
3. Be documented if the property is licensed or if the fire brigade has issued an alterations notice
4. Have their findings recorded along with any actions that may need to be addressed

Fire alarm regulations for commercial buildings stipulate that all premises must have a fire detection system which must be tested weekly and serviced twice annually. The alarm should be audible to everyone in the building and there must be a call point on every floor.

If the commercial property is high-risk – such as a restaurant – an automatic fire alert system should be used. Lower-risk properties must have manual systems installed by law.

If you are unsure of the about any aspect of commercial fire regulations, it may be advisable to consult a landlord fire risk assessment template.

Asbestos management in commercial property

Unless the contract or lease specifically states otherwise, as a landlord of a commercial property you are ultimately responsible for ensuring that any asbestos on the property presents no risk to those living or working in or around it.

Correct asbestos risk management is vital. Not only does exposure to airborne asbestos particles present a very real danger, the penalties for irresponsibilities are high:

1. A fine of up to £20,000
2. Up to 12 months in prison

In extreme cases of failing to deal with asbestos correctly, landlords can face unlimited fines, up to two years in prison, or both.

What does an asbestos survey involve?

If you suspect that you have asbestos within your commercial property you should:

• Check the lease or contract to determine who is responsible for asbestos within the property
• Employ an accredited commercial property surveyor to undertake an asbestos survey of the property. Common places to look for asbestos in your workspace include:

1. Insulation
2. Cement
3. Ceiling tiles
4. Insulation coatings
5. Textured coatings

• Have the findings – if any – analysed and record the results
• Undertake a health and safety risk assessment of the property
• Arrange the safe removal of any asbestos judged too hazardous to remain within the property
• Continue to monitor any remaining sources of asbestos and ensure that they are in good condition
• Ensure that any tenants know about the asbestos and take all necessary precautions whilst in the property
• In the case of further building work, ensure that anyone working on the site is fully aware of all the relevant information regarding asbestos

If you are the owner of a commercial property that may stand empty for a long period of time such as a warehouse, the property needs to be surveyed for asbestos regardless of whether it is in use or it is vacant.

How much does it cost to remove asbestos?

The cost of removing asbestos from a commercial property varies depending on the substance containing the asbestos and the degree of treatment necessary. However, removal is an wise investment as the presence of asbestos (even encapsulated) may decrease the value of a property.

If you are already aware of a potential source of asbestos within a commercial property, a basic analysis of the material will cost around £50. A full survey to find any potential sources of asbestos within the premises will usually cost at least £200, possibly more if the building is very large or there are factors such as space restrictions to consider.

Generally speaking, the removal of asbestos materials cost around £50 per square metre if the substance is concrete, coating or tiles. Asbestos removal companies often charge flat fees for smaller, self-contained objects that can be removed in one go, such as water tanks.

The cost of asbestos removal from a commercial property also depends on the area in which you live. Several councils offer asbestos removal services at greatly reduced rates, or even for free. Get in touch with your local council in order to find out what their policies are.

Asbestos encapsulation

Removing asbestos from a commercial property is not always necessary. It may be sufficient to seal the asbestos in order to prevent the release of harmful airborne particles – a process known as encapsulation. This typically costs around £8 per square metre, a far less expensive option than outright removal.

It is also worth considering the costs of restoring any gaps the asbestos removal may have left in the property – removal of large amounts of asbestos material might call for substantial redecoration afterwards.

Electrical certificates and energy performance certificates (EPCs)

Commercial properties require valid electrical safety certificates and energy performance certificates by law. As the landlord, you are responsible for obtaining these certificates and ensuring they are valid.

How long does an EPC last?

An energy performance certificate (EPC) rates the energy efficiency of a building from A – the most efficient – to G, the least efficient.  A commercial EPC is valid for ten years.

A commercial property is required to have a valid EPC by law, with a failure to do so resulting in a fine of up to £5,000.

Electrical safety in rented business premises

Unless specified otherwise in the lease, the responsibility of ensuring the electrical safety of a commercial property lies with the landlord. You will require a certificate in order to prove the premises has passed the relevant electrical safety compliance checks.

How much does a landlord electrical safety certificate cost?

For a commercial landlord, the cost of an electrical safety certificate will depend on the size of the property, ranging from £150 to £1,080.

Management of maintenance and repairs

Most commercial property leases are designated as ‘Fully Repairing and Insuring’ (FRI), meaning that the majority of responsibility for commercial property maintenance lies with the tenant. However, the landlord is usually responsible for maintaining the exterior of the building and any costs pertaining to safety.

While the tenant may be financially liable for any dilapidations to the property, it is most often the responsibility of the landlord to organise the necessary repairs. For this reason, it’s advisable to survey the condition of the building when you’re planning to invest in a property and before each new tenant takes occupancy.

Commercial property insurance requirements

Commercial landlords are advised to secure property insurance in order to provide financial safety in the event of damage to or destruction of the property.

Bespoke commercial insurance packages can be tailored to your individual needs and may provide:

1. Structural cover in case of damage sustained as a result of burglary or natural disasters such as fires, floods or storms
2. Terrorism cover in case of damage caused by an attack or act of war
3. Loss of rent cover in case of damage to the property which prevents the tenant’s safe occupation of the property

Commercial tenant services

Once you’ve invested in a commercial property and sourced suitable tenants to occupy the premises, you also need to be aware of the responsibilities you hold to any such tenants as the landlord of the property, including:

1. Rent reviews
2. Lease renewals
3. Lease surrenders
4. Lease assignments
5. Rent collection
6. Chasing rental arrears

Investing in commercial property is an effective means of building a property portfolio, providing you do your research before you invest in a property and you are aware of the responsibilities of owning and managing a commercial property.

If you know what commercial property ownership and management will entail and you’re happy to adhere to the required regulations, you could be well on your way to a robust property portfolio.

The post Commercial Landlord Responsibilities – What You Need to Know Before Investing first appeared on Commercial Property Management London | Martin Slowe.

Due to foreclosure, abandonment or a lack of maintenance, you can often find commercial properties listed on the market for considerably less than their potential renovation value.

In certain locations – particularly large cities – where inflated property prices are the norm, such properties have enormous appeal for small business owners, property renovators and investors alike.

It is true that buying a commercial property in need of refurbishment for an affordable price and renovating it can be an excellent investment but such a purchase, if ill-considered, can just as easily become a financial pitfall.

Renovating an empty commercial property is a major undertaking for the inexperienced. Not only is renovation extremely time-consuming, project costs can rapidly spiral out of control without a well-researched budget. Competition for commercial property with renovation potential is also likely to be high.

If your skills are in property investment and not renovation and you lack the time to do the necessary planning and investigation, it is advisable to instruct a commercial property specialist to source a suitable property for you, bidding at auction if required.

Renovating a commercial property to sell

Buying a commercial property for less than the market value, renovating it and immediately selling it for a profit – a process known as flipping – can be difficult if the property in question is commercial.

Different businesses require a range of different retail environments in order to operate successfully, so it is advisable to find a suitable commercial tenant to occupy the property prior to making drastic structural changes.

Renovating a commercial property for your own use

If you are looking for a property to operate your own business from, renovating a commercial property for your own use can be the ideal solution. It offers the opportunity to construct a bespoke space which is ideally suited to your company’s needs at an affordable price, rather than paying more for what may be a less optimum space.

Many affordable empty commercial properties are large – especially if you are converting warehouse space – and though at first glance this might seem a disadvantage, it means that you have the option in the future of subdividing the space and leasing it to other commercial tenants for an additional source of income.

Although this kind of renovation is not a quick-return scheme and will increase your upfront expenditure it can be a sound financial and business investment in the long term.

Tips for renovating a commercial property

If you plan to purchase and renovate a commercial property to either sell or occupy, you should:

1. Conduct extensive research on your renovation budget before committing to a property, contacting specialists for a second opinion if necessary. If in doubt, remember that it is far better to underspend on a renovation project
2. Be prepared for a large commercial mortgage in addition to the renovation costs if you decide to repair a large commercial property space
3. Commercial properties tend to gain value more slowly than residential properties, but they are more resilient to fluctuating market conditions
4. Bear in mind that commercial property is a relatively unstable investment. You will have to be knowledgeable and persistent in order to make a profit

If you need any advice or further information regarding commercial property sales and purchases, commercial property management or commercial landlord and tenant services, get in touch with our expert team who will be more than happy to help you.

The post How to Go About Renovating Empty Commercial Property first appeared on Commercial Property Management London | Martin Slowe.

A commercial mortgage – also known as a business property mortgage – is used to buy either:

1. Premises for an established business
2. Premises for a prospective business

The deposit and rates for a commercial property mortgage are usually higher than those required for a residential property mortgage.

What are the different types of commercial mortgage?

There are two different types of commercial property mortgage:

1. Owner-occupier commercial mortgages – whereby a business owner rents the premises for their own trading purposes. Properties may include those with residential space above the business space, such as flats above shops
2. Commercial property investment mortgages – applicable to buy-to-let properties in which an owner rents the space to third-party businesses

What are the terms for a commercial property mortgage?

The terms of a commercial property mortgage can vary depending on the current market. Before applying for a commercial mortgage it is wise to consider the terms that will best suit your planned business investment and any financial restrictions you may have.

Commercial mortgages typically require a down payment of at least 25% and sometimes as much as 40%, although this is unusual. The size of your loan and its interest rates will be determined by factors including:

1. The current and past performance and future plans of the business you are considering
2. The rent you expect to make on the property
3. The security you can provide – if you own another commercial or residential property with a large amount of equity it can often be used as security towards your loan
4. The lease of the property – if the commercial property is leasehold and has less than 70 years remaining, this will increase the security required to acquire the mortgage

Rates and repayment terms vary widely among commercial property mortgages but 15-30 years is the most common. A business loan too short-term to be considered a commercial mortgage (typically less than three years) is generally described as a bridging loan regardless of its size and rates.

What are the fees for a commercial property mortgage?

For those looking to apply for a commercial property mortgage, there is a diverse range of fees that should be investigated and considered. These include:

1. Arrangement fees of 1-2% of the loan amount, paid on completion of the loan
2. Commitment fees, paid upfront as part of an application to pay for the lender’s time if you don’t accept the offer. These are non-refundable
3. Broker fees of up to 1% of the loan amount, payable when they’ve found you a loan that matches your stipulations
4. Valuation fees, a mandatory part of your application. Commercial valuations are more thorough than residential ones. Price is bespoke and tailored to your situation, but starts at around £500
5. The legal fees of you and your lender – the total amount will depend on your individual situation, but fees typically start at around £500

If you need any advice or further information regarding commercial property investments or  commercial property management get in touch with our expert team who will be more than happy to assist you.

The post What to Look for When Taking out a Commercial Property Mortgage first appeared on Commercial Property Management London | Martin Slowe.

Before investing in commercial property, it’s important to understand the definition of a commercial property. Basically, any property which is not used for residential dwelling is categorised as commercial property, including offices, warehouses, shops, cafes and restaurants.

Other types of property classified as commercial are:

• Hair salons
• Beauty salons
• Travel agencies
• Post offices
• Vehicle showrooms

Why invest in commercial property?

There are several advantages to investing in commercial property, including financial benefits. While commercial properties tend to increase in value more slowly than residential properties, they are also more resilient to fluctuating prices in the market.

What kind of commercial property should I invest in?

It is wise to consider your interests, skills and industry experience when you are considering the type of commercial property you choose to invest in.

If you are familiar with a particular industry and you understand its requirements, you can put this knowledge to good use when investing in commercial property. Factors to consider include:

1. The location of the commercial property
2. The size of the property
3. The layout of the property
4. Any future potential for expansion

Some commercial property spaces combine retail, office and industrial space, whilst others combine these with residential spaces, such as flats above shops. These can be particularly sound financial investments because they offer increased potential to make a profit from both commercial and residential lets.

How long should I invest for?

A commercial property lease is typically longer than its residential counterparts. While residential leases can be for as little as six months, commercial property leases often run for ten years or more.

While there are benefits to this increased lease length, such as having to find suitable tenants for the property less frequently, as a potential commercial property investor you should be aware that if you cannot find a tenant for the property, your finances could suffer as you will still have to cover the costs of maintaining the property – together with any mortgage payments if applicable – even if the property is empty.

The type of investment also impacts how long you should consider investing for.  Consider how important an immediate return on investment is to you and take this into account before investing in a commercial property, as a financial return can often take time.

What kind of commercial property investment should I make?

There are three methods of commercial property investment:

Ownership – whereby you own the entire property and lease it to commercial tenants

While this type of commercial property investment is potentially more profitable than direct funds as you can collect tenants’ rent in full, there is also an increased financial risk as a  large amount of upfront expenditure is required.

This is a less common investment option than either direct or indirect funds.

Direct funds – where you own part of the commercial property

Also known as a ‘bricks and mortar’ fund, this type of purchase offers many of the advantages of ownership for a more affordable price. If there are commercial tenants in place you will receive some of their rent.

Unrelated to equities and bonds, this is a stable investment option.

Indirect funds – where you own shares in a property investment company

This method of investment represents a lower-risk strategy, as the company will own a variety of different types of property. A short-term return on your investment is much more likely with indirect funds than other types of investment.

You can sell shares instantly, meaning that you can move in and out of the market quickly

Buying and selling costs are less than direct funds or ownership.

For further advice or information regarding commercial property management , commercial property sales and purchases, or commercial landlord and tenant services, please just get in touch with our expert team who will be more than happy to advise you.

The post What to Consider Before Investing in Commercial Property first appeared on Commercial Property Management London | Martin Slowe.

A commercial energy performance certificate – or EPC – tells you how energy efficient a commercial property is, graded on a scale of A – G for CO2 emissions. The most efficient properties are in band A, with the least efficient in band G. More energy efficient properties benefit the environment, as carbon dioxide emissions are lower than in those properties which are less efficient.

Owners of commercial property are required to provide a valid EPC when they sell or lease a premises.

How long is a commercial EPC valid for?

Commercial EPCs are valid for a period of ten years.

How much does a commercial EPC cost under 2018 regulations?

The cost of a commercial EPC will depend on the size of the specific property, with current fees set at:

What do the new 2018 commercial EPC regulations mean for me?

The new EPC regulations mean from 1st April 2018 it is now illegal to lease or let a commercial property in the UK with an EPC rating of F or G, under Minimum Energy Efficiency Standards (MEES).  These new minimum standards were released by the Department of Energy and Climate Change on 22nd July 2014 and confirmed on 5th February 2015.

The regulations state that the minimum energy efficiency standard a commercial – or non-domestic – property must meet is a grade E. The standards are intended to assist the UK government in achieving the obligations set out in the Energy Act 2011, specifically to improve the energy efficiency of property in the commercial sector.

Between 2008 and 2015, 35% of commercial buildings in the UK with an EPC certificate were rated E, F or G, suggesting a significant percentage of non-domestic property could be affected by the new regulations. This could cause issues when you are letting a commercial property, or alternatively seeking to renew a lease, as a property must be improved to at least an E rating before it can be rented to commercial tenants.

Are all commercial properties included in the new 2018 regulations?

All non-domestic property classified in the Energy Act 2011  – properties let on a tenancy which are not residential dwellings – are governed by the MEES regulations if they sit within the usage classes of A1 – D2.

The only exemptions from MEES are properties which are not required to adhere to EPC regulations.

What are the next steps for complying with the 2018 epc regulations?

If any of the commercial properties in your portfolio fall below the required energy efficiency standard of grade E, you should consult a specialist energy assessor in your local area who will be able to provide expert advice on how to improve the efficiency of the property. They can also provide an energy performance certificate if you require one.

If you need any advice or further information regarding commercial property management or commercial property surveying, get in touch with our expert team who will be more than happy to help you.

The post Commercial Epc: April 2018 Changes Explained first appeared on Commercial Property Management London | Martin Slowe.

A commercial lease agreement is a contract or agreement between the landlord and tenant for the lease of commercial premises such as a shop, office or restaurant.

The lease grants the tenant the period of time they have to rent or to have exclusive possession of the property, in agreement with the landlord and subject to rent payments and clauses.

The Landlord and Tenant Act 1954 protects the commercial lease agreement unless stated otherwise.

The contents of the commercial lease agreement

A commercial lease agreement typically includes:

• The rent amount
• Demise
• Date
• Covenants applicable to the landlord and tenant
• Rights reserved
• Rights granted
• Restriction on planning
• Attestation

A commercial lease agreement may also include specific information regarding:

What does a commercial lease agreement say about service charges?

Service charge information will be included in the commercial lease agreement if you are leasing part of a commercial premises. This is the cost that it takes to maintain the common areas of the premises which you will be responsible for organising.

What does a commercial lease agreement say about alterations?

The contents of the commercial lease agreement will answer questions such as:

• Can I  sell the lease or sublet the commercial premises?

The majority of commercial lease agreements will allow this if you can guarantee the performance of the new tenant and that they will pay the rent. This would be your responsibility, so if the rent wasn’t paid, the tenant left or declared bankruptcy then you would have to take the lease back.

• Can I alter the commercial premises?

You can usually grant consent by a licence for alterations tenants wish to undertake, however some alterations will still need planning permission, for example shop fronts and external signs.

There are some exceptions when you don’t need to grant your tenants permission, but this will be worded in the contents of the commercial lease agreement.

What does a commercial lease agreement say about repairs?

• Who is responsible for repairs in a commercial premises?

Generally, the terms of a commercial lease agreement are known as full repairing and insuring leases, so the tenants are responsible for all repairs. If tenants share the building with others, you are usually responsible for repairs as the landlord.

What does a commercial lease agreement say about rent?

• Can the rent increase during the term of the commercial lease agreement?

This depends on the terms and conditions and the length of the lease stated in the contents of the commercial lease agreement. Leases of more than five years usually have rent review provisions.

• When will I have to pay the rent for my commercial premises?

The terms and conditions on the commercial lease agreement will state what day the rent is due each quarter, on Old English Quarter days:

1. March 25th
2. June 24th
3. September 29th
4. December 25th

Occasionally, a commercial lease will require a monthly rental payment, but this is not common.

What does a commercial lease agreement say about assignment?

The tenant is not responsible for all covenants in the contents of the commercial lease agreement on assignment, unless an Authorised Guarantee agreement (AGA) was signed.

An AGA is an agreement where you agree to continue responsibility for the new tenant and often forbid or limit assignment in the first place. Some clauses require the need for consent from the landlord.

What does a commercial lease agreement say about insurance?

An insurance clause in the contents of a commercial property lease agreement ensures that you insure the property in line the lease. For example if the commercial premises is damaged by an insured risk, you may choose to offer a rent reduction or give your tenant the opportunity to terminate the commercial lease agreement if they wish.

Break clause commercial lease example

Break clauses are included in the commercial lease agreement to state how either you or a tenant can terminate the lease. If this set, legal conditions are not followed, the termination of lease will not be legal and therefore not take effect. For example, if a tenant fails to pay all the rent owed, the termination of lease will not happen until all money owed is paid to the you.

For advice or further information regarding commercial property management or landlord and tenant services, please just get in touch with our expert team who will be more than happy to assist you.

The post What Are the Contents of a Commercial Lease Agreement? first appeared on Commercial Property Management London | Martin Slowe.

If your commercial lease agreement is nearing the end of its agreed term and your tenants wish to remain, it is advisable to be aware of the specific rights of the tenant regarding a renewal.

What legislation decides what happens when a commercial lease expires?

The Landlord and Tenant Act 1954 states that a lease can be automatically renewed by a tenant, on similar but updated terms. This Act provides security of tenure, meaning you can only regain possession of the property from your tenant if:

1. You require the property to be vacated for personal possession
2. You require the property to be vacated for development
3. The commercial tenant has a history of non-payment of their rent
4. The tenant has breached the terms of the lease
5. The property has been divided into individual units which, if sublet, would accrue a higher rental figure than one lease

What is a protected lease?

A protected commercial lease entitles the tenant to a statutory right to request a new lease on similar terms to the existing lease. They are also not obliged to vacate the premises.

For a lease to be protected, certain criteria must be met:

1. The tenant must occupy the premises solely for business use
2. The tenant must have exclusive occupation of the premises
3. The lease must be granted for a fixed term

If you have granted your commercial tenant a protected lease, you cannot change the agreed rental figure without the tenant’s agreement.

What is contracting out?

As a landlord, you can exclude a commercial lease from protection by ‘contracting out’. A strict procedure must be followed prior to contracting out a lease, but once this has been completed, the tenant is obliged to vacate the commercial premises at the end of the term specified in the lease. The tenant also has no automatic right to renew the lease.

If a lease is contracted out, once the end of the term is reached you can choose to renew the rental agreement based on renegotiated terms, such as a rental increase. It is then up to the tenant if they accept these terms and sign a new lease.

What to do when a commercial lease is due to expire

Whether the lease is secured or unsecured, you should consider the prospective renewal around 18 months before the date of expiry. A specialist commercial property solicitor can advise you on any specifics of the lease where necessary.

If your tenant has a secured tenure and they request to renew their lease, you have 2 months to dispute the request. If you choose to grant the request, you can then begin to negotiate new terms. An independent valuation will be required to determine a new rental fee, if applicable.

The tenant has the right to remain in the property under the terms of their existing lease while new terms are negotiated if they have a protected lease.

If your tenant has an unsecured tenure, once the end date of the existing lease has been reached, the tenant has no right of occupation and you can demand they vacate the property immediately.

If you need any advice or further information regarding commercial property management or landlord and tenant services, get in touch with our expert team who will be more than happy to help you.

The post What Happens When a Commercial Lease Expires? first appeared on Commercial Property Management London | Martin Slowe.

What is a SIPP?

A SIPP – or self invested personal pension – is one of the most tax efficient ways to save for your retirement. The flexible pension plan allows you to invest your funds where you wish.

If you choose to save in a SIPP, you could receive up to 45% tax relief on the contributions you make, plus your funds will be exempt from capital gains tax.

(Note: this information is correct at the time of publication but is subject to change)

Holding a commercial property in a SIPP

A commercial property – such as a shop, office, bar or restaurant – can be held as an investment within a SIPP. You do not have to work from the property, or indeed rent it to commercial tenants, to be eligible to hold it in a SIPP.

The commercial property will be purchased by a group of trustees, who will hold it for you. Any rental income which the property accrues from tenants is paid directly to the trustees, who will use the funds to pay any interest on the mortgage, plus meet any capital repayments.

Once the mortgage – if applicable – is repaid, the property can either be sold or kept as part of a portfolio to generate income as part of a drawdown plan.

A SIPP that is used to invest in commercial property typically generates positive cash flow from the rental funds which the property – or properties – accumulate.

Investing in commercial property using a SIPP

If you wish to buy a commercial property using a SIPP, you can typically borrow up to 50% of the net fund value of the SIPP to contribute to the purchase, with the funds from the rental income used to make the monthly mortgage repayments.

Some SIPP plans do however limit the percentage of funds from a SIPP that can be used to invest in property, so you should always check any terms before you proceed with the purchase.

There is no limit on the amount of funds from a SIPP which can be invested in property, so if you choose, 100% of the funds held in a SIPP can be invested into commercial property.

The property must be purchased at a fair market value and the rental fee must be aligned with market rates.

If used to fund a commercial property purchase, there must be sufficient funds in a SIPP to cover:

• Maintenance costs
• Insurance costs
• Fees

It’s also advisable to have funds in place to cover contingencies such as:

• Vacant periods
• Rent arrears
• Repairs

A commercial property can be owned outright by one SIPP, but if there aren’t sufficient funds in a SIPP to fund the full cost of the property purchase, it is possible for the property to be part-owned in conjunction with other owners and SIPPs.

If you need any advice or further information regarding commercial property purchases, or any aspect of commercial property management, simply get in touch with our expert team who will be more than happy to help you.

The post How Can a SIPP Be Used to Invest in Commercial Property? first appeared on Commercial Property Management London | Martin Slowe.

What is a joint venture?

A collaborative joint venture involves several stakeholders, which may include:

1. Property developers
2. Investors
3. Funders
4. Landowners

Each party will contribute – and share – their capital, resources, skill and risk across the property development project. Joint ventures are based on the premise that one party needs the skills, resources or funds of the other and vice versa.

What are the types of joint venture?

There are 2 main types of joint venture:

1. Profit share joint ventures – a commercial property development project is completed, a profit is made and the profit is then split between each party in shares of a pre-agreed amount
2. Fixed interest joint ventures – whereby one party provides the funds for the development and another provides the skills or resources. The individual providing the funds will usually pay the other party in the form of a fixed rate of interest, rather than a percentage of any profit

Why opt for a joint venture?

One of the most frequent reasons that a commercial property developer will consider a joint venture is to provide the necessary capital to fund the development. An alternative to a bridging loan, a JV can cover the costs of the project, with the profits and proceeds split after the sale.

If you already have the necessary funding in place for a commercial development, a joint venture can also be used to provide any specialist skills which the project requires, such as architectural or design skills.

Joint ventures are generally more suited to short term development projects rather than long term. There should always be a clear exit plan in place for all parties.

When is a joint venture not suitable?

While a JV may seem ideal for every commercial property purchase or development, it may not always be the most suitable option.

You should consider if a joint venture is the right option for you if:

1. It’s your first commercial property investment or development – JVs typically work best when one party has a proven method and model, then the other party can contribute a skill or resource that enables the model to be executed more effectively, or at a lower cost
2. If you don’t have to use this route – if you can afford to pay for the skills of a builder, architect or other tradesperson without entering into a JV, you should do so. Similarly, bridging finance will often work out as a more financially viable option than entering into a joint venture
3. You prefer to have sole accountability for a property development project – if you prefer to make the decisions on a project, it may be best to opt for an alternative funding option to a joint venture, as each party will need to be in agreement for key project decisions

What is a joint venture agreement?

Once you have chosen the parties who will be entering into the joint venture with you, it’s highly advisable to work with a solicitor to craft a joint venture agreement to protect the interests of each party.

Ahead of signing the agreement, you should:

1. Ensure you’re happy to work together before the project begins
2. Decide which type of JV best suits the development project – profit share or fixed interest
3. Ensure all parties are clear on who will be responsible for what within the development project
4. Agree on any profit shares to be allocated once the project is complete
5. Agree how the venture will be secured – ideally through a contract

Once you – and the other parties in the joint venture – are happy with each element of the proposed venture, a solicitor can draft the JV agreement.

For expert advice on all aspects of commercial property management – from valuations and sales to surveying and insurance – get in touch with our team of commercial property specialists.

The post When Is a Joint Venture Right for Commercial Property Development? first appeared on Commercial Property Management London | Martin Slowe.

If you instruct a team of bailiffs to recover an outstanding debt from your commercial property – whether that is a shop, a restaurant or an office – the implications of the action are considerably higher for your tenant than if the recovery was from a residential property, as clients, customers and employees are likely to be on the premises in trading and retail buildings.

If you need to instruct the services of a bailiff to recover a debt from a property, it’s important to be aware of exactly what the bailiff is entitled to take from the commercial property by law and what they are not entitled to seize against the debt.

What items can bailiffs take from commercial property?

Most items can legally be seized from a commercial property to recover debts owed by a tenant, however there are some exceptions. These include:

• Goods which are substantially incorporated into the premises, such as sinks, toilets and radiators
• Goods belonging to you as the landlord, such as fixtures and fittings
• Any rented or leased items, as these are defined as belonging to a third party
• Items which are being used at the time (with some exceptions)

Bailiffs are also entitled to seize tools and manufacturing machinery in recovery cases such as rent arrears, as these items are often deemed to be of a higher value.

Goods do not have to be physically removed from a commercial property in order for them to be classified as ‘seized’. The bailiff may mark items as seized, placing them under a ‘walking possession agreement’, or alternatively they may inform your tenant that the goods have been seized against the debt. In either case, the tenant must not remove the goods from the property or otherwise interfere with them once they have been seized.

What can baliffs take to recover commercial rent arrears?

If your tenant is in arrears with their rent, you can instruct a bailiff directly to recover the amount owed to you. The bailiff is only legally entitled to seize any property or goods against a sum clearly defined as rent under the commercial lease. Any items which are not defined as such cannot be seized against the debt by law.

To collect commercial rent arrears, a bailiff is only permitted to enter a commercial premises between the hours of sunrise and sunset. They are not permitted to force entry to the property, although they can enter the property through an open window, or by climbing a fence. They must always provide certification, plus show their warrant if they are requested to do so.

If your tenant accepts the rent arrears are due when the bailiff attends the property, they should pay the bailiff on the premises. If they are contesting the amount, they are entitled to seek legal advice to challenge the debt, which will prolong the recovery process.  

If you require any advice or assistance regarding any aspect of commercial property management, commercial property sales or purchases, get in touch with us and our expert team will be happy to advise you.

The post What Can Bailiffs Take from Commercial Property? first appeared on Commercial Property Management London | Martin Slowe.

What is stamp duty land tax?

Stamp duty land tax – SDLT – is a compulsory tax which must be paid by law on a property or land purchase which is above specified thresholds in England, Northern Ireland. The Scottish equivalent of stamp duty is Land and Buildings Transaction Tax (LBTT).

The buyer of the property is liable to pay the calculated amount of stamp duty, which will apply to both freehold and leasehold purchases.

Qualifying first time buyers became eligible to benefit from stamp duty relief in November 2017. If a residential property is valued at less than £300,000, the purchase is exempt from stamp duty.

As a general rule, HMRC must be notified of any property transactions, even if there is no requirement to pay stamp duty.

How is stamp duty land tax calculated?

The amount of stamp duty applicable to a commercial property is charged on the total purchase price. The figure is calculated based on the proportion of each tax band in which the property sits.

If a commercial property is valued at £185,000, the first £150,000 of this price is exempt from stamp duty, with the current 2% threshold applied to the remaining £35,000.

Are any commercial properties exempt from stamp duty land tax?

A commercial property which is valued below £150,000 is exempt from stamp duty. The limit is slightly lower for residential property, at £125,000.

Freehold stamp duty rates

The rates of stamp duty applicable to freehold commercial property are as follows:

Leasehold stamp duty rates

If you purchase a leasehold commercial property, you are liable to pay stamp duty on both the lease purchase price and the value of the property’s annual rental yield.

Current leasehold stamp duty rates are as follows:

Stamp duty land tax deductions

The amount of stamp duty applicable to a commercial property is calculated based on the purchase price of the property and any land included in the sale. Any additional items included in the transaction such as machinery, tools and fixtures will reduce the amount on which stamp duty is payable.

If a reduction causes the commercial property price to fall within a lower tax band, any stamp duty payable will be charged at the lower percentage rate.

If you require any advice or assistance regarding commercial property sales or purchases or any other aspect of commercial property management, get in touch and our expert team will be happy to help you.

The post How Does Commercial Stamp Duty Apply to property? first appeared on Commercial Property Management London | Martin Slowe.

The subject of a commercial property service charge is often contentious between a commercial landlord and tenant. Each party may have differing views of what is an acceptable state of repair and who is responsible for maintenance, so it is essential to be aware of what you are liable for as a commercial landlord.

What is a service charge?

Much like residential property, a commercial service charge is simply a means by which a commercial landlord can recover the costs of maintaining and repairing the property – where required – from the tenant.

The service charge can also cover the cost of certain services associated with a commercial property.

What does a commercial service charge include?

The specifics of a service charge will vary from property to property, but they may include:

• General repairs (which may include structural repairs)
• Cleaning
• Refuse and waste collection
• Lighting
• Heating
• Air conditioning
• Security

A service charge may also cover:

• Staffing costs – including property management fees
• Insurance costs

Commercial service charges should only be applied for the recovery of costs associated with property maintenance and repair.

For larger maintenance or repair works, tenants are provided with several quotes to compare before a contractor is hired to complete the necessary work. Work will usually only commence once tenants have had the chance to review and feedback on the quotes.

Any major improvements or renovations should be excluded from a commercial service charge and instead recovered through a sinking fund.

What is a Sinking Fund?

A Sinking Fund is a set amount of money that is specifically set aside to cover any major repair or maintenance work which may be required on a commercial property in the future.

Common with leasehold properties, sinking funds are managed via the service charge associated with the property, which each leaseholder is liable to pay. The cost of the contribution to the sinking fund is typically calculated as a fixed percentage of the total service charge.

Contributions are held ‘in trust’ in an interest-bearing account until the funds are required.
A sinking fund can also be set up by a private commercial landlord. They simply need to put aside a set amount of the rent they receive from the commercial property each month, often between 2% – 5%.

If a landlord operates a sinking fund, they should ensure they handle contributions separately to any service charge contributions.

Sinking funds are used to cover the cost of repairing:

• Drainage
• Communal lighting
• Footpaths (where applicable)
• Access roads (where applicable)

Commercial service charges should only be charged for services that are provided to communal areas of a building, or for services that all tenants benefit from such as heating or air conditioning.

Maintenance services which only benefit a single tenant – such as the cost of cleaning their sole area of a commercial property if there are several tenants – are the responsibility of the individual tenant and should not form part of the overall service charge.

For advice and assistance in all matters of commercial property management, sales and purchases, just get in touch and our expert team will be happy to help you.

The post What are the service charges in commercial property? first appeared on Commercial Property Management London | Martin Slowe.

Differing from residential property, commercial property is defined as any property which is not used for domestic dwelling.

Commercial property includes:

• Shops
• Restaurants
• Cafes
• Coffee shops
• Offices
• Warehouses
• Hair salons
• Beauty salons
• Travel agencies
• Post offices
• Vehicle showrooms

You should always ensure that a property designated for commercial use has the correct planning permission for the nature of the business you intend to lease to. The Planning Portal specifies a list of use classes for commercial property in England and Wales.

If a tenant wishes to make any alterations to a commercial property – either structural or cosmetic – they will need your consent as the landlord to do so.

How does a commercial property lease work?

A commercial lease is a legally binding contract between the landlord and the commercial tenant which specifies a fixed term during which the tenant can occupy and trade from the commercial premises.

The length of a lease will vary and they can run for up to 25 years. Commercial leases are more flexible than they have been historically, with optional break clauses (which must be negotiated as part of the commercial lease) now giving the option for both the tenant and landlord to serve notice during the term of the tenancy without facing a penalty charge.

If applicable, a break clause will be defined in the lease. The clause will usually specify a period of six months’ notice of a date defined in the lease.

Once you have received an offer from a prospective commercial tenant, you can negotiate the terms of the commercial lease agreement. A document will be drafted which contains the key terms of the lease agreement, known as heads of terms.

These include:

• The type of the commercial rental agreement
• A brief description of the deal
• The rental value
• Currency
• Payment agreements
• Proposed completion timescale

This document is not legally binding.

A prospective tenant is likely to want to see the findings from a building survey prior to signing a lease in order to be aware of the condition of the building, plus any likely repair and maintenance costs.

Local searches will identify if there are any plans that may impact the commercial property and the wider area, plus any flood risks.

A Schedule of Condition report detailing the exact condition of the property, alongside photographs, should be attached to the tenancy agreement.

What is included in a commercial lease?

When you negotiate a commercial lease, a number of factors need to be agreed as part of a standard approach to commercial property management. A commercial lease typically specifies:

1. The type of commercial property being let
2. The address of the property
3. The term of the tenancy
4. Whether the tenancy is a fixed term or periodically renews
5. The length of the lease
6. Any break clauses
7. Lease renewal provisions (if applicable)
8. The rental amount
9. When the rent is due
10. Any rent free periods
11. When and how a rent review will be calculated
12. The nature of business that may be conducted on the premises
13. Service and maintenance charges and what they include
14. Who is responsible for any maintenance or improvements
15. The required deposit
16. Whether the tenant can sublet the property
17. Termination notice
18. Insurance provisions

A commercial property lease also states the rights and responsibilities of both the tenant and landlord for the duration of the term.

Leases often include rent reviews every three, four or five years. Rent can go up as well as down, depending on the terms of the commercial lease. If the rental figure does not increase after a review, it will remain the same.

What is a Commercial Property Licence Agreement?

A commercial property licence is typical if the property is only set to be occupied for a short time – for example a pop up bar, restaurant or shop. Licences also apply to commercial property that has been split into units, such as warehouses and industrial buildings. Licences typically last for a maximum of 6 months.

The tenant has to pay a licence fee, which may be paid weekly or monthly in advance. A commercial licence has fewer terms and conditions than a traditional lease, but the tenant has no right to renew the licence once it has expired.

How do you calculate monthly rent on a commercial property?

The rent tenants pay on their commercial premises is likely to be one of the highest costs they will encounter.

Typically commercial rent is paid quarterly, on old English quarter days:

1. 25th March
2. 24th June
3. 29th September
4. 25th December

However, monthly commercial rental payments are now becoming more frequent and are an option if you wish. The option to make monthly payments is subject to negotiation and the terms of the commercial lease.

Alongside commercial rent, tenants are also liable to pay any specified service charges for maintenance, repairs and redecoration and – if you as the landlord are liable for it – the necessary insurance.

For further advice on all aspects of commercial property management get in touch and our expert team will be happy to help you.

The post How is commercial property defined in law? first appeared on Commercial Property Management London | Martin Slowe.

All commercial fire safety legislation in England and Wales falls under The Regulatory Reform (Fire Safety) Order 2005, which was designed specifically to simplify the existing legal requirements at that time.

With some minor exceptions, any commercial premises – property that is used for a non-domestic purpose – is bound by these regulations.

Depending on the individual premises, commercial fire regulations may be the responsibility of:

• The owner
• The landlord
• The employer
• The occupier

Anyone else who may have control of the building, such as a facilities manager, risk assessor or commercial property management company.

Who is defined in commercial fire regulations as a ‘Responsible Person’?

The individual who is responsible for these fire regulations being carried out is known as a ‘Responsible Person’. Every business must have at least one designated ‘Responsible Person’ and it is their responsibility to ensure that certain duties are carried out, action is taken to prevent fires and prevent injury or death if a fire does occur.

A ‘Responsible Person’ is accountable for:

• Carrying out a regular fire risk assessment
• Informing staff or their representatives of any safety risks you have identified
• Ensuring appropriate fire safety measures are in place
• Maintaining these safety measures
• Providing fire safety information, instructions and training to staff
• Creating adequate safety plans to be carried out in the event of an emergency

Commercial fire regulations

The fire safety regulations for commercial buildings differ to residential properties in a number of ways and there are a number of procedures and regulations that must be adhered to in order to ensure the building is as safe as possible:

What do commercial fire regulations say about Fire Risk Assessments?

All businesses and commercial properties must have a regular fire risk assessment, which is the responsibility of the Responsible Person. This is one of the first things an inspecting officer from the fire authority would request to see if they inspected a commercial premises, alongside the fire safety log book.

Your fire risk assessment must:

1. Be reviewed regularly
2. Be recorded by law if you have more than four employees
3. Be documented if the property requires a licence
4. Be documented if the fire brigade has issued an alterations notice
5. Record any findings and actions which need to be taken

Many commercial businesses choose to use a specialist fire risk assessor to carry out their risk assessment, but this is not obligatory.

Anyone in the company who carries out a fire assessment must be able to:

1. Identify and potential fire risks
2. Identify any individuals at risk
3. Assess the suitability of fire safety prevention measures such as fire alarms and sprinkler systems
4. Assess the existing safety measures such as escape routes and fire drills
5. Create and implement a fire safety action plan
6. Keep the fire risk assessment updated

If a commercial business does not adhere to the required fire safety regulations, they face a fine, prosecution or in cases of extreme negligence, a prison term.

What do commercial fire regulations say about fire extinguishers?

Fire safety regulations specify that commercial premises must be equipped with appropriate fire fighting equipment. This includes fire extinguishers as standard and, depending on the nature of the business, may also include sprinklers and hose reels.

Fire extinguishers in a commercial building must:

1. Undergo an annual maintenance test to ensure they are in good working order
2. Be appropriate for the type of business and the location they are situated
3. Be maintained by a competent person

What do commercial fire regulations say about fire safety signs?

All businesses and commercial premises must, by law, have at least two fire safety signs visible:

Fire Action Notice – explains what to do in the event of a fire
Fire extinguisher ID sign – explains the type of fire extinguisher and its location

What do commercial fire regulations say about fire alarms?

By law, all commercial premises must have an appropriate fire detection system in place. The system must be tested weekly and should be serviced at least every six months.

If your business is more at risk of a fire, such as a restaurant, an automatic system is recommended. Manual systems should suffice for lower risk business premises.

For all businesses, everyone in the building must be able to hear the alarm clearly and there must be a call point on every floor.

What do commercial fire regulations say about emergency lighting?

Emergency lighting is designed to provide light if the normal lighting in a building fails in a fire.

This type of lighting has three primary purposes:

1. Escape route lighting – illuminates safe exit routes from a building
2. Open area lighting – also known as panic lighting, these lights keep communal areas illuminated
3. High risk task area lighting – provides sufficient light to provide visibility to shut down processes or equipment which may be dangerous

Your emergency lights should be ‘flick-tested’ – turned on and off – monthly and serviced fully annually.

For further advice and assistance in all matters of commercial property management, plus commercial property sales and purchases at auction, get in touch and our expert team will be happy to help you.

The post What are the fire regulations for commercial buildings? first appeared on Commercial Property Management London | Martin Slowe.

All non-domestic properties have a rateable value, which is fixed by an independent valuation officer from the Valuation Office Agency. Properties are revalued once every five years.

A commercial property may house a number of tenants, so each unit of property is given its own rateable value. Non-domestic properties such as shops or restaurants that also have a domestic property incorporated – such as a flat above the commercial property – are referred to as composite properties and they are valued for both business rates and council tax.

A list of rateable values is given to each local authority, from which they calculate the applicable business rates of the property.

What are business rates?

Also known as national non-domestic rates, business rates are essentially a type of tax which is applicable to business properties. The annual rate is specified by the government, with the funds collected by the local authority in which the commercial property is located.

Business rates are charged on almost all commercial – or non-domestic – properties, including:

• Shops
• Offices
• Restaurants
• Factories
• Warehouses
• Pubs and bars
• Guest houses
• Holiday rental properties

Some commercial properties are exempt from paying business rates, such as farm buildings and properties used for the purpose of disabled welfare.

You will receive a bill for business rates in February or March each year, for the following tax year. Payments are usually split into ten equal monthly instalments. If you miss a monthly payment, you will receive a reminder, indicating you have seven days to pay the amount. If you do not pay within seven days, you will be liable to pay the outstanding balance that is remaining for the year.

How to calculate rateable value of a property

Business rates are calculated by multiplying the rateable value of your property by a figure that is set by the government. This figure is called the ‘national no-domestic rating multiplier’.

The amount you pay for business rates may be adjusted depending on transitional arrangements or other reliefs that you may be eligible for.

If a commercial property is eligible for business rates relief, you will pay a reduced level of business rates.

Can a rateable value change?

The valuation officer may adjust the RV of a property if the circumstances of its use have changed. The individual who is liable to pay the business rates may also ask for the RV to be changed if the circumstances of use have changed or if they believe the RV is wrong.

If the valuation officer and ratepayer do not agree on the RV figure, the ratepayer can appeal to an RV tribunal.

How to avoid business rates

If you work from home, you may still be liable to pay business rates. You should check with your local authority to determine if you are required to pay.

If a commercial property is empty, the owner will be exempt from business rates for 3 months. After 3 months, the property will continue to be exempt if the rateable value is below £2,900. If the RV is above £2,900, business rates are applicable. Empty properties are not eligible for small business rate relief.

Extended empty property relief is available if the property is:

• Owned by a charity
• A listed building
• Used as an amateur sports club
• An industrial premises such as a warehouse, which is exempt for a further 3 months

For further advice on commercial property management and rates, plus extensive sales and purchase knowledge, get in touch and our expert team will be happy to assist you.

The post What is the rateable value of a commercial property? first appeared on Commercial Property Management London | Martin Slowe.

In general, there are four main principles to consider for commercial VAT purposes:

VAT exemption: What is it?

As a general rule, the sale or rental of a commercial property such as a shop, warehouse, office or restaurant is exempt from VAT, meaning neither the individual purchasing the property or the prospective tenant would have to pay VAT.

The VAT exemption also applies to:

• The exchange of interests
• Rights over and /or licences to occupy commercial premises

Whilst this VAT exemption is beneficial for a purchaser, it also means that the vendor or landlord is unable to recover any VAT on related costs, which may be significant.

There are also some exceptions to this rule, as the standard rate of VAT – currently 20% – is applied to commercial property transactions in the event that:

• The property is new (anything less than three years old)
• The vendor or landlord has chosen to charge VAT, for example if the property has been renovated or refurbished and they wish to recover some of the costs incurred

Opt to tax

A commercial property owner can opt to charge VAT at the standard rate when they sell or lease their property. If they choose to do so, they must charge VAT on everything relating to the property.

They are also then able to recover any VAT charged to them on costs relating the property. Opting to tax can therefore provide a substantial benefit in some circumstances, such as in the event that the property has been subject to extensive refurbishment, with its associated costs.

It is important to bear in mind that some companies are unable to recover any VAT incurred on costs. These are known as ‘VAT adverse businesses’ and include:

1. Charitable sectors
2. Financial
3. Insurance
4. Health and welfare

As such, it is important to consider the potential market for a commercial property prior to making a decision regarding the option to tax, as it may be difficult to sell or lease the property if the market is mainly comprised of businesses who are unable to recover VAT.

If a landlord or vendor does opt to tax, there are certain procedures and restrictions they must adhere to. HMRC must be notified in writing within 30 days of the decision to opt to tax. This must be done every time the commercial property is leased or sold, as the option to charge VAT does not ‘follow the property’. Once made, the decision lasts for 20 years and is largely irrevocable.

Transfer of going concern (TOGC)

If the commercial property is sold with tenants in place or it has an existing commercial lease agreeement, the vendor would usually be required to charge VAT as the standard rate. However, if the prospective buyer intends to continue leasing the property rather than occupy it themselves, the sale is classified as a ‘transfer of going concern’, which is exempt from VAT.

This is an appealing option for a buyer, although there are certain conditions that must be met. The buyer must match the seller’s VAT position on the date of transfer, meaning if the seller is VAT registered and has opted to tax the commercial property, the buyer must do the same and ensure they have notified HMRC prior to the date of transfer.

VAT on new build commercial property

Any commercial property that is less than three years old is classified as new and is liable to the standard rate of VAT.

The prospective buyer of a new commercial property who intends to rent it out is therefore likely to opt to charge VAT on rents going forward and on a future sale of the property (unless it qualifies as a TOGC) in order to recover the VAT charged on acquisition.

With increasing property values and strict HMRC penalties in the case of non-compliance with VAT, mistakes can be extremely costly.

For advice and assistance in all matters of commercial property sales, purchases and management, get in touch and our expert team will be happy to help you.

The post What is the VAT on commercial property rent? first appeared on Commercial Property Management London | Martin Slowe.