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Keeping track of the costs of renting a commercial premises for the first time

PUBLISHED: 09:06 31 July 2019 | UPDATED: 09:06 31 July 2019

A service charge is common when renting premises which form part of a building to cover  the upkeep of any common parts such as lifts and meeting rooms  Picture: Getty Images/iStockphoto

A service charge is common when renting premises which form part of a building to cover the upkeep of any common parts such as lifts and meeting rooms Picture: Getty Images/iStockphoto

Archant

As promised in June's article, this month I am highlighting the costs that tenants will be responsible for when renting their first commercial premises.

Juliet Farrington-Breeze, a trainee solicitor at Cozens-Hardy  Picture: contributedJuliet Farrington-Breeze, a trainee solicitor at Cozens-Hardy Picture: contributed

On completion of a lease, payments due include:

Rent

Depending on whether a rent-free period has been negotiated, tenants will need to pay an apportionment of rent to the landlord. Rent is usually due monthly or quarterly. If quarterly, this could be a substantial sum and therefore tenants should be wary not to splash out on refurbishments and marketing without having funds saved away.

Tenants should take into account that their payments of rent throughout the term of the lease could change if there is a rent review. A rent review, as the name suggests, is an alteration of the rent payable. It is usual during a mid to long-term lease that this will occur. The fewer rent reviews there are, the more advantageous it is for the tenant because reviews are usually drafted as 'upward only'. This means that the rent which is payable will not decrease.

Rent deposit

This will be payable if tenants have agreed to pay a rent deposit for security of compliance with the terms of the lease.

Service charge

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If tenants are renting premises which form part of a building (eg an office floor) then the landlord is likely to be responsible for repairing the main structure and the upkeep of any common parts. The way in which the landlord is reimbursed for this maintenance is through a service charge.

Insurance

The landlord will usually insure the premises and the tenant will either reimburse the whole amount of the insurance premium or a proportion of the premium if there are multiple premises within the building.

Stamp Duty Land Tax (SDLT)

Tenants could have a SDLT liability to pay to HMRC depending on the length of the lease, the rent payable and whether a premium is paid for the premises. We would be happy to advise on whether SDLT will be payable and assist on submitting your SDLT Return to HMRC.

Land Registry registration

Leases for a term of seven years or over are registrable at the Land Registry and there is a fee payable for this registration. This fee varies on the amount of rent payable, but is usually around £40.

We pride ourselves on being upfront with costs; we always make our clients aware of the payments which will be due at the outset, so that plans and budgets can be made accordingly.

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