Anyone know anything about commercial property?

Roper

Hi,
Can someone help me with some info please?
Whats the deal with taking a lease out on commercial property? Is there anything special that needs to be considered? Any costs that suddenly jump out on you and slap you in the mouth?

I'd appreciate any input.

Cheers

lomb

solicitors fees for starters, in the uk it seems to be normal to pay the vendors fees as well!

length of lease- if its over 10 years, the goverment want vat on 14 times the annual rent. so if the rent is 20 grand, the vat works out as 14 multiplied by 20 and then 13.5% of this so its ALOT, ul need a bridging loan to cover the vat while awaiting a refund (maybe 3 weeks). make sure u are vat registered before completion. some people like myself cannot vat register as we provide exempt services which is a pain in the ...

any key money on the lease? this is also known as selling a lease at a premium, ie where someone who has a lease disposes of it to someone else and charges them for it in addition to paying rent to the original landlord. sometime leases are sold at a reverse premium where u pay someone to take it off your hands.

if the landlord seeks personal gauranttes then u are liable to pay the rent personally. preferably do it in the name of a company and dont offer gaurantees.

what else? yes dont take a long lease on anything thats not prime, ie a factory, office, warehouse, etc etc. long leases are fine on retail where u can sell on the lease if its a prime shop but long leases on offices is suicide. there is a massive oversupply of it at the moment and ul never pass it on. if u personally gaurantted it its even crazier.

also yields are just under 5 % so generally u will pay for the privilage of renting in the sense that u can buy at under 4% interest and they are rising substantially year on year especially good property (not offices, although even these are rising!)

if u take a lease out for anything under 5 years like 4 years 9 months, you have no automatic legal right to stay there and can be turfed out which is a disaster if u have run a successful shop that releys on location. this is irrelevent with offices as u can move down the road.

break options- this allows u to break a lease, make sure u have generous option like every year for offices etc.

landlords restrict uses, and what u can attach outside to the property, get agreements in advance for alterations.

service charges- these can be HUGH, range from 2 euro a square foot, to 10 euro a square foot, know roughly what u are going to pay b4 u sign the lease.

rent reviews, usually every 3 or 5 years, and usually upwards only.

get a good solicitor , hel know the ropes

so now u know everything there is to know about it, hope that helps:)

Roper

Holy sh1t, that's a lot. Much appreciated, In return I'll try to get someone to buy your car:)

lomb

your welcome, also check out water rates have been paid. apparantly a guy i knew rented somewhere in tallaght and it turned out the landlord never paid them. it turns out its written in law that the current occupier is responsible for back rates as well. even though in the lease it stated that the landlord was responsible this doesnt override the legislation. the bill was 12500 grand. after talking to his solicitor i think he left before he paid it and exercised a break option.

renting commerical is a absolute nightmare, can i ask what u are looking for, office, shop, warehouse/industrial, creche, or something else?

thanks for the car thing its going on carzone next week if there are no offers on boards, its going one way or another as the new car has been built and is on its way from wolfsburg:D

Victor

Also consider the actual council rates, typicly based on the value of the property and converted to a percentage of the lease amount.

lomb

Victor wrote:

Also consider the actual council rates, typicly based on the value of the property and converted to a percentage of the lease amount.

true these can be HUGH. good point victor.
also check that the rates bill you have been given is for the occupied rates, as they get up to half off for it being unoccupied.
rates can be as an example 4500 euro on a 1200 sq foot office in south county dublin (in clondalkin):eek:

also theres a revaluation in progress middle of this year i think as currently the rates are based on 1988 rental levels so your bill could skyrocket. they have said the total rate take wont change they will be balancing it out so some properties that are worth more pay more while others pay less.

Victor

Two main types of lease:
IRI - Internally repairing and insuring
FRI - Fully repairing and insuring

FRI means that you have to insure the entire building and make any repairs necessary, whatever the cause, you can even be landed with a bill for upgrades (e.g. tighter Building Regulations) that are necessary at the end of the lease.

IRI means you only deal with the interior.

Roper

Looking for a floorspace type martial arts studio. The one I'm looking at today fits just about all of the nightmare scenarios you placed above! Still, have to have a go. I appreciate all the feedback folks there's a lot there I didn't have a clue about.

lomb

also consider planning permission. id look for a short term lease tbh. at least if something goes wrong u can get somewhere else. give us a shout back if theres anything more u want to know about:)

There are about 50 or 60 things that one should look for in a commercial lease, but the most important is insurance, then insurance and insurance, followed by insurance. The most important thing is that the lease sets out clearly the responsibility for insuring what. You don't want to find out after the products liabiity case, or the customer slipping suit, or the place burning down...

lomb

lomb wrote:

also consider planning permission. id look for a short term lease tbh. at least if something goes wrong u can get somewhere else. give us a shout back if theres anything more u want to know about:)

Yes, but if the business is succesful, then the landlord will screw you on the renewal.

Go for a long lease with an option exerciseable by the tenant only to break at the end of a short time, say 2 years or so. That way you can see how things are going.

lomb

Deleted User wrote:

Yes, but if the business is succesful, then the landlord will screw you on the renewal.

Go for a long lease with an option exerciseable by the tenant only to break at the end of a short time, say 2 years or so. That way you can see how things are going.

then theres vat problems with long leases, also hel screw u anyway as in the lease will be a 3 year upwardly only rent review. personally i looked into renting and after renting currently im buying a place. renting is a joke, u have no control at all. if u have the money def buy. considering its cheaper to buy adds to it as well as it being an appreciating asset so is esentially 'free'

problem is 1. finding money
2. diverting effort on property when it should be spent on business.
3. stamp duty of 9%
4 planning problems
5 finding something suitable, no one is selling prime anymore with it increasing year on year ud have to have a tumour to want to sell or owe someone money..
6. banks only advance for 15 year terms on commercial, but u can negotiate in interest only periods and then renegotiate them so all you will be doing is paying rent to the bank ( but the place will be going up by more than the interest per annum)
like everything its a compromise, my advice is get a 5 year lease with a break at year 1 or 2, and in the mean time look for somewhere that u can call your own if everything is going well..