How to Let your Commercial Property in Brighton
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.
- Price – Property Valuation
- Advertising your Property
- Commercial Property Marketing
- Heads of Terms
- Lease or Licence?
- Rent Deposit Deed / Guarantors
- Photographic Schedule of Condition
- Property Management
- Our Service
STEP ONE: Price – 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 TWO: Preparation
- Do you need the consent to the letting from your Mortgage company or your own landlord?
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 and they will also want to vet the lease before it is finally completed. You will have to pay their fees (both internal if they decide they want a valuation and legal fees to approve the lease). 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. Again, you should be aware that you will have to pay your landlord’s legal fees in this case.
- Commercial Energy Performance Certificate (EPC)
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. An EPC informs your tenants about your property’s energy performance – it is a legal requirement to have this in place. Having a good EPC rating can be an advantage, as your property will be seen as much more energy efficient and less expensive. If you want to improve your rating, you should seek professional advice. You are not required to supply an EPC if:
- Your commercial property is due for demolition
- The total floor space is less than 50 square meters
- Your property has a low energy demand
- Your property is a place of worship
- Your property is intended for temporary use (less than two years)
- Health and Safety
Health and Safety is an important responsibility of the occupier of the building. 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. At Burt Brill & Cardens, 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 THREE: 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. Check your local area to see whether there are any agents that specialise in your type of property. If you do need advice or assistance in this regard please do not hesitate to contact us as we are familiar with a number of the local agents who could be appropriate for your needs.
STEP FOUR : 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. Local knowledge can be very important. For example, there is currently a shortage of purpose built offices (that are open plan) and Brighton has a lot of businesses working in converted Victorian buildings. There are many ways that your agent can promote your commercial property, including:
- Outside Marketing: ‘To Let’ signboards – this will increase the local awareness of your property’s availability to rent.
- Direct Marketing and networking
- Online marketing
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 FIVE: 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. It also means that you can build a good working relationship to deal with any problems effectively that may arise during the rental agreement. This needs careful consideration as 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 SIX: 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 cover:
- the length of term of the lease
- the amount of the annual rent and whether this is paid monthly or quarterly
- 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 (both percentage and amount) 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 a 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
- 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 SEVEN: Lease or Licence?
When dealing with commercial property, there are two main types of rental agreement – that is either a lease or a licence:
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.
- A 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 EIGHT: 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 NINE: PHOTOGRAPHIC SCHEDULE OF CONDITION
It is important to consider whether the lease should have attached to it a photographic schedule of condition. It adds certainty for both parties to the lease. It means that normally 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 TEN: 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.
GOT A QUESTION ABOUT COMMERCIAL PROPERTY IN BRIGHTON? CONTACT BURT BRILL & CARDENS TODAY ON 01273 604123.
AFTER THE TENANT HAS MOVED IN:
You can decide to manage your property yourself or you can employ an agent, depending what best suits your circumstances. Your commercial lease will set out the responsibilities of repair and maintenance between yourself and the tenant. Usually there will be a requirement for the tenant to keep the premises in a specified condition, which is why photographs are required. Tenants are also often required to pay a service charge for the cost of the services provided by the landlord and for maintenance of the property. Dilapidations refer to the breaches of repairing obligations set out in the lease either during the tenancy or when the lease ends. Your Tenant has an obligation to you, under the terms of the lease to keep your property in the condition required by the lease and if they fail to do this severe notices of repair can be claimed for the cost of work and repairs from your tenant. Normally the tenant is responsible for contributing towards the buildings insurance, even though the policy is in the landlord’s name. It is also the tenant’s responsibility to insure their contents and take out employers and public liability insurance and also to insure any plate glass in the property, if relevant.
Most tenants have the right to renew their business lease when it ends, unless it has been contracted out of the Landlord and Tenant Act 1954. To be contracted out certain procedures have to be followed by the landlord’s solicitors and the tenant has to waive their rights to renew before the start of the lease and then the tenant has to vacate at the end of the term. In certain circumstances you may also have the right to refuse to renew the lease, such as if your tenants have breached their obligations or if you decide to use your property yourself, or want to redevelop it
Burt Brill & Cardens is 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. Whether you are looking to lease a shop, factory, office, restaurant or nightclub, we can help. We are also aware that problems can arise from tenants not complying with their obligations. Our solicitors can quickly and efficiently help you resolve these issues. Call us today on 01273 604123 or Contact us for a FREE initial consultation about:
- Granting and taking leases
- Terminating and transferring leases
- Lease variations (re-gears)
- Lease renewals
- Tenant default and dispute resolution
- Lease management (including deeds of variation and licences)