Overview of issues facing landlords of commercial premises
Landlords of commercial premises need to be actively involved in the management of properties in their portfolio. More realistically, they will need to appoint professional advisers – surveyors, solicitors, architects, accountants – to deal with matters on their behalf.
Marketing and letting a property
When premises become vacant they are likely to be marketed for letting by an agent with knowledge of the local market. The agent should advise on possible uses of the premises and the target annual rent. The agent or a solicitor should advise on the appropriate form of agreement with the occupier, usually a lease or licence.
When a tenant is found detailed heads of terms should be prepared setting out in layman’s language what has been agreed. The more detailed the heads of terms, the easier it should be to agree the wording of the lease. The heads of terms should give as much information as possible on the sums payable by the tenant – rent, insurance, service charge etc. The tenant’s solicitors will chase for this information if it is not provided up front.
Management during the tenancy
During the term of the lease (or licence) the landlord needs to ensure that all relevant legislation is being complied with, for example regulations relating to fire safety, asbestos management and construction works, planning legislation and other laws relating to the specific use of the premises.
The landlord also needs to collect rent, insurance premiums and service charge payments in a timely fashion and ensure that the tenant is provided with relevant documentation. This may include copies of insurance policies, service charge estimates and audited accounts.
Buying a tenanted property
Often commercial landlords buy properties that are already let to a tenant. The buyer will need detailed information from the seller about the tenant’s payment history and behaviour, as well as copies of the lease and related documentation. This will help the buyer to assess whether the proposed investment is a sound one.