Guide to renting commercial property

Guide to renting commercial property

Inexperienced business buyers seldom give much thought to the property side of their transaction. However, it’s often the work required to transfer leasehold business premises that holds up proceedings – and that can cost you money. It’s important, then, to get to grips with what’s required early on in the process and to have a basic grasp of the legal terminology too.

Factors to consider when renting commercial property

As the existing Tenant of the business premises, your Seller is only selling a right to occupy the premises for the remaining length of time (the Term) agreed in the original Lease with the Landlord. Consequently, in order to secure the transfer of the premises to yourself, the Landlord must also be included in the negotiations as a third party.

In particular, your Seller will need to obtain the Landlord’s consent to transfer the lease, which will be legally documented in a Licence to Assign signed by yourself, the Seller and the Landlord. Landlord’s seldom regard this process as an urgent priority, which can sometimes lead to frustrating delays.

The Landlord will want references from you (or personal guarantees from directors if you are buying as a limited company). If you’re buying through an agent, the agent will normally organise this. Having suitable referees already lined up can help speed up proceedings.

Developing good lines of communication with all relevant parties is key to moving the transaction forward through these initial stages, as is an ability to pre-empt and satisfactorily resolve any queries and concerns of the Landlord.

Beware the hidden costs of renting

You’ve probably factored an apportioned cost for the premises into your purchase price for the business. If you’re working with a solicitor who has given you a fixed price quote for their legal fees, you’ll also have a degree of certainty about how much the acquisition process is going to cost you. However, much like when you buy a house, the transfer of business premises will involve some additional costs which you might not be aware of. These may include:

  • A Rent Deposit (normally equivalent to 3 – 6 months’ rent) as further security for the Landlord.
  • Payment of the Landlord’s legal fees (which could be anything from £500 to £3,000), although sometimes it’s possible to negotiate a split of these costs with the Seller. You will have to find this money upfront as the Landlord will require an undertaking (written promise provided by your solicitor) that the funds are held on account and that their costs will be paid before they instruct their solicitor to undertake any work on the matter.
  • Payment of Land Registry and other search fees (approx. £250 – £400)
  • Fee for Notice of Assignment (approx. £50), confirming to the Landlord the date the legal transfer took place.

Transfer of leasehold premises: what happens when?

The work required to transfer business premises runs in parallel with the work required to transfer the business shares and/or assets. So, in addition to going through the due diligence process (where you and your solicitor put together detailed enquiries to ascertain the health of the business) and drafting and agreeing the Sale Purchase Agreement, you will make detailed enquiries about the condition and compliance of the premises, too.

Industry standard forms known as CPSEs (Commercial Property Standard Enquiries) are generally used for this purpose. Additional legal documents must also be prepared and signed to legally transfer the business premises: as well as the Licence to Assign, you will be required to sign a Deed of Assignment (for an unregistered lease) or Transfer (for a registered lease) and, usually, a Rent Deposit Deed and an Authorised Guarantee Agreement (although these may be incorporated within the Licence to Assign).

Once the Buyer has received responses to the business and premises enquiries, any outstanding queries or issues have been resolved and final drafts of the relevant legal documents are in place, the parties can exchange contracts, at which point they are legally obligated to conclude the deal.

Occasionally, exchange and completion take place on the same day but, more usually, completion takes place a few days later, after which there are a few post-completion formalities to conclude. These include payment of Stamp Duty Land Tax and registration of your interest at the Land Registry, as well as the need to give the Landlord formal notification of the assignment.

Make a free enquiry

The sooner we become involved in the process of helping you to buy your business and acquire your leasehold premises, the more likely it is that your purchase will be successful, so please contact us today.

Please either call us now on 01392 879414 or complete our Free Online Enquiry and we will soon be in touch.

Our full contact details can be found on our Contact Us page.

We look forward to hearing from you.








2017-11-24T12:04:41+00:00Commercial Property Law|

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