Rent and other sums to be paid to the landlord

Rent and other payments to the landlord

Rent and other payments to the landlord 

Rent is usually the most significant sum paid by a tenant to a landlord. However, leases usually require the tenant to make additional payments to the landlord. These payments can include VAT, service charge, and insurance premiums. In limited cases, the tenant may pay a “premium” to the landlord for the grant of the lease.

Rent or licence fee 

Rent is traditionally paid quarterly but it is becoming more common for it to be paid monthly. Longer leases will have a rent review, usually every five years. If the occupier has a licence rather than a lease, the rent may be called a licence fee.

VAT 

VAT is a complex area. Commercial property is generally exempt from VAT but landlords may exercise the option to tax. This will result in VAT being payable on the rent and certain other sums. 

Insurance premium 

Usually business leases require the landlord to insure the building and the tenant to reimburse the premium (or a fair proportion of the premium if the lease is of part of a building). Leases contain detailed provisions about the policies that must be maintained and what will happen if the premises are destroyed or damaged. 

Service charge 

A service charge is likely to be payable if the tenant’s property forms part of a multi-let building and the property shares services with other units. Service charge can be paid on account or on an ad hoc basis. 

Premium for the grant or assignment of a lease

Premiums for the grant or assignment of business leases are relatively rare. Usually leases are granted at a market rent with no up-front premium payable. Assignments do not generally command a premium either. However, in exceptional circumstances a premium may be payable.

Top