Commercial Property Frequently Asked Questions  

Do I need to have Searches carried out?

We would recommend that you have a Local Authority Search carried out on all commercial premises, this will reveal whether the highway fronting the property is public or privately maintained, whether there are any planning permissions/conditions, tree preservation orders, or enforcement notices affecting the property.

In addition, you may wish to have a Water & Drainage search and/or an Environmental Search to ascertain whether the property is potentially contaminated.

Do I need a Survey?

We would recommend on any commercial premises that you undertake a Survey of the property, as you will usually be responsible under the terms of any Lease to keep the premises in good and substantial repair and condition. If they are not in good condition when you take it on, under the terms of the Lease you could potentially be required to return them in better condition than you actually took them on. Again, things such as roofs and main structure and drainage should be checked, whether or not you purchase the freehold or take a lease.

What terms should I consider when negotiating a new Lease?

When negotiating with the Landlord over the terms of the Lease, you should carefully consider what your needs are for the premises. Please find below a brief summary of the main terms to consider:

•  Term of Lease – how long will you require the premises for your business needs?

•  Assignment provisions – will you be able to assign the Lease to a third party or sublet it? Should your business needs change then you may wish to be able to assign or sublet it to enable you to move on from the premises.

•  Break clauses – it may be possible to negotiate a break clause to determine the lease early, at specified times during the term of the Lease. If the Landlord insists on a mutual break clause, you should be aware that the Landlord would also be able to determine the Lease on the agreed break clause date.

•  Option to renew – Under the Landlord and Tenant Act 1954 most business tenants are protected with a statutory right to renew their Lease upon the expiration of the same. If you agree to exclude the Act, then you will have no right to renew the Lease and the Landlord may decide not to offer you a new Lease.

•  Rent Review clause – If the Lease is for a period of longer than 5 years, then it is common to have a Rent Review clause every three / five years, depending on the term of the Lease. This will usually allow the Landlord to increase the rent to the open market rental value (if it has increased), depending on the terms of the clause.

•  User clause – you should check with the Landlord what the premises can be used for under planning legislation to ensure that you can use to the premises for your intended use.

•  Repairing obligations. Under a Lease, you can be responsible for either the full maintenance and repair of the premises, or the tenants repairs can be limited to only internal / non-structural repairs. This is why it is important to consider the current condition of the premises.

Clearly all cases are individual and one of ourcommercial department team would be happy to advise on the particular circumstances of your requirements.

What Stamp Duty will I have to pay?

Stamp duty on commercial premises will vary according to whether you taking on a Lease or purchasing Freehold Premises. If you are purchasing Freehold Premises, then the stamp duty will be payable on the consideration paid for the property as follows (as at February 2007):

You should bear in mind that stamp duty is also payable on any VAT element of consideration and also on some Goodwill if you are purchasing a Business.

Stamp duty for Leases is slightly different. If there is a premium payable for the Lease then stamp duty on the premium will be calculated in the same way as transfers of freehold land (except special rules apply for premiums where is rent exceeds £600 annually). In addition to stamp duty on any premium payable there may also be stamp duty payable on the rental element of the Lease. If the ‘Net Present Value' of all payments over the life of the lease is over £150,000, there is an additional stamp duty of 1% of that value. This is a calculation that we will be able to advise you on once we have specific details regarding the Lease that you are taking on.

If you are taking an assignment of an existing Lease, then stamp duty will only be payable on the consideration that you pay for the Lease.

Land Registry Fees

Land Registry Fees range from £40 to £700 depending on the value of the transaction. All freehold land must be registered, as do leases of a term of seven years or more.

Legislation affecting commercial premises

In any commercial premises these days you need to be aware of certain aspects regarding the premises themselves due to EU Legislation:-

•  Control of Asbestos at Work Regulations 2002

There is an obligation on any person who has the duty to maintain premises, or who has control of premises to have a risk assessment carried out to ascertain whether asbestos is or is liable to be present in the premises. It is a criminal offence not to have an assessment carried out. If there is no assessment on the premises you are looking to take on, whether Freehold or Leasehold we would recommend that you have one carried out prior to you becoming legally obliged to take on the property, as if asbestos is later found you would be responsible for its clean-up, which can be very expensive.

•  Regulatory Reform (Fire Safety) Order 2005

This regulation came into force on 1 October 2006, and requires all commercial premises to have a fire safety risk assessment. The assessment must be obtained by the person in control, which will usually mean the tenant of commercial premises. The government recommend the assessment to be carried out professionally. Again it is a criminal offence not to have the assessment carried out and may affect the buildings insurance not to have an assessment.

•  Disability Discrimination Act 2005

Service providers are under a duty to take such steps as it is reasonable, to make reasonable adjustments to premises, to allow access to the service provided. What is reasonable will depend on the nature of the service being provided, the size of your business and its financial and other resources. Other factors may also be considered depending on the individual circumstances of the case. Adjustments should also be made for disabled employees at the premises.

Please note that the above information is general only and not intended to be full or specific advice. Each transaction has its own specific circumstances and requirements and therefore should you wish to obtain further advice on your particular requirements please call one of our commercial department team members on 024 7663 1212.

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