Brighton is a vibrant and fast developing city full of history, creativity, and character. There are a wealth of independent businesses and locations in Brighton, offering lots of opportunities for commercial property owners to own a business or for investors wishing to start investing in ‘London-by-Sea’ or add to their existing portfolio. This guide has been put together for property owners who are looking to let their commercial property in Brighton, taking you through each step of the process.


 

STEP 1: Property Valuation

The first step is deciding how much your property can be let for. You should focus on what your tenants are looking for and what it is that they value. Your property valuation will be impacted by factors such as the type of property, size, facilities available, parking and of course, location. Unless you are very experienced, it is a good idea to seek professional advice on rent and whether there is any possibility of achieving a premium.

STEP 2: Preparation

If you have a mortgage over the property you will usually need the consent from your Mortgage company to enable you to let the property. They will also want to vet the lease before it is finally completed. If you do not have a mortgage over your property then you should ensure that you are able to provide copies of your deeds to your solicitors at the earliest opportunity. If you own your property under a lease you will most likely need the prior consent of your landlord to what will be in your case, a sublet.

Commercial Energy Performance Certificate (EPC)

An EPC informs your tenants about your property’s energy performance – it is usually a legal requirement to have this in place. Obtaining your EPC can take several weeks, so it is advised you have a copy (that is valid) in place before you consider advertising your property. Having a good EPC rating can be an advantage, as your property will be seen as much more energy efficient and less expensive.

Health and Safety

You must make sure that your property complies with health and safety regulations and legal requirements, as there can be severe penalties for non-compliance. These include asbestos regulations, gas safety, fire risk assessments and testing electrical equipment and appliances.

Local Searches

If you have an up to date Local Search available for the prospective tenant to use, it can speed up the letting process. Other searches you can also carry out include Radon Gas Search, Chancel Liability Search and Flood Assessment Search and Water/Drainage Searches. We have the facilities to arrange these for you so you do not need to look at third party providers and the search results can be received online for speed and ease.

STEP 3: Advertising your Property

Today’s property market benefits from a high number of agencies and websites that can help you advertise your property. It is important that you use a reputable website or agent as this will increase the chances of having a smooth letting process.

STEP 4 : Commercial Property Marketing

Your agent should use a variety of marketing tools to create interest in your property. They should have an understanding of the Brighton commercial property market and therefore an understanding of what tenants will value. Usually a marketing budget will be put in place at the beginning;  you should check to see if your marketing budget is included in your agent’s fees or if it will be an extra cost. You will also want to gather as much information as possible about your property to help with the marketing process.

FOR COMMERCIAL PROPERTY ADVICE CONTACT BURT BRILL & CARDENS TODAY ON 01273 604123.

STEP 5: Tenants

Vetting your tenants is really important. You want a tenant that will maintain your property and most importantly be able to pay the rent, who you can build a good working relationship with so you can deal with any problems that effectively. The cost of removing a non-paying tenant is high and can take some time to achieve, which means you are prevented from reletting to a better tenant. The vetting process should be carried out by your letting agent and will involve a thorough review of the tenant’s income, employment, and previous history as a tenant. The tenant’s ID will also be checked as well as their credit status. It may be necessary for you to consider additional people as guarantors, or a rent deposit, if the proposed tenant has not rented property before. Both will give you some measure of protection against the tenant breaching the terms of the lease.

STEP 6: Heads of Terms

The Heads of Terms or Memorandum of Letting is a document that lays out the primary terms to which you and your tenants have agreed. The main terms should include the length of term of the lease, the annual rent and how this is paid, whether there will be any review of rent during the term, the terms upon which the tenant will be permitted to transfer the lease on to someone else, the terms upon which the tenant can carry out alterations to the property (if at all), contributions to your building insurance, contributions to the repair of the building if you are only renting out part, if there will be a need for a Rent Deposit Deed, if there will be a need for Guarantor(s), if the tenant will be required to pay your legal costs or contribute to them in order for the deal to be completed, and if the tenant will have the right to ask for a new lease or if they have to vacate at the end of the term.

There may be other terms which are specific to the property relating to times of use, noise, car parking and liquor licensing. Although not a legal requirement, this document is very useful for setting out the main points that have been agreed. It is not legally binding but when both parties have agreed terms, the legal process can begin and solicitors instructed.  

STEP 7: Lease or Licence?

When dealing with commercial property, there are two main types of rental agreement – that is either a lease or a licence:

Lease

A Commercial Lease is a binding agreement (either short term or long term) between a landlord and a business, for the rental of property. You may need to consider if you need a break clause. This is a clause in a lease giving the tenant, landlord or both, the right to terminate the lease early. The lease may state the break can be exercised at any time (a rolling break), on a specified date, or after a specified date. The break notice will usually need to be served in writing, a certain amount of time prior to the intended break date. Requirements for serving a break notice will usually be specified in the lease.

Licence

A licence agreement gives the tenant permission to use or occupy the property only, often with shared facilities such as lavatories and a kitchen. This type of agreement is essentially the landlord giving permission for the tenant to occupy for a specific period of time. This also means the tenant/ licensee gains no interest in the property (or land). A licence agreement offers advantages such as more flexibility and is generally granted for a shorter time period. You will have the right to enter your property at any time and your tenant does not have the right to renew the licence. In the Brighton area there are many start-up independent businesses that are keen to occupy by way of a licence as they are shorter term and often have fewer obligations than a formal lease.

STEP 8:  Rent Deposit Deed / Guarantors

If your tenant has not held a commercial lease before, or the references show their financial status is not as robust as you would want, but you still want to rent to them, you could consider asking for a Rent Deposit. This will usually be 3 or 6 months of the annual rent. This will be kept by you for the duration of the term, or until the tenant leaves the property with your consent or transfers the property to another tenant, with your consent. This can then be used to cover, at least in part, damage or lack of repair and any arrears of rent. You may also consider requiring a Guarantor, who will step into the shoes of the tenant should they default but does need to be someone of better financial standing than the tenant to make it worthwhile.

STEP 9: Photographic Schedule of Condition

It is important to consider whether the lease should have a photographic schedule of condition attached to it. This can provide certainty for both parties to the lease; it means that the tenant will not be required to put the property into any better state and condition than as shown in the photographs, at the end of the lease or when the lease is transferred during the term.

STEP 10: Plans

If you are letting your property in sections or only as one part, you should consider organising a professionally prepared set of plans. This will avoid uncertainty as to which area is rented to the tenant and may be necessary if the lease is more than seven years long, as the tenant is obliged to register the lease at the Land Registry and they require professional plans.

The Next Steps

We are a Brighton based and client-focused solicitors firm. We have experienced commercial property law experts and understand how vital it is to provide the right advice throughout the letting process. Call us today on 01273 604123 or email enquire@bbc-law.co.uk for your initial consultation.