If you own a commercial property, you may be unsure about what to do with it. Should you lease it out to tenants or sell your commercial building as it is?
Many property owners are unaware of the risks associated with leasing commercial property and the high fees associated with selling.
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What exactly is a commercial lease?
When you rent out a commercial property, you must decide:
- what you want to do
- what you will allow the tenant to do.
So that you can consider which letting document is most appropriate.
It is important to use the correct document so that the tenant does not obtain rights in the property and so that you can easily remove the tenant (lease forfeiture) if they do not pay the rent or breach any obligations in the agreement.
If the wrong type of document is used, a tenant may obtain rights to remain at the property. It is important to instruct a solicitor to manage your contract, whether you are a landlord or a tenant, as a legal document is likely to be written using archaic and specialist terms.
So what is the difference between a commercial and residential lease?
In a residential lease, the lease is issued for typically 6 or 12 months, and the landlord is responsible for all repairs and insurance. When the lease expires, it rolls over each month. You need to give two months’ notice to quit and regain possession of the property. If the tenant doesn’t vacate the house, a court eviction order is required.
However, in a commercial lease, the typical lease is a minimum of 3 years; the tenant is responsible for all internal repairs to the property, and the tenant reimburses the landlord for the insurance. If the tenant refuses or stops paying the rent, the landlord can evict them without a court order and change locks. The rent is also paid in advance quarterly usually.
Who should I hire to draft the lease?
You’ll need to pay a specialist solicitor to guide you through this complex and daunting area of business letting agreements and commercial leases, and as you can imagine – this isn’t cheap. But before you can lease your commercial property, you must agree overall terms with your potential tenant. This document is called Heads of Terms.
These specialist solicitors can charge £1,000s because of the complex issues that can arise with commercial property. It can also be time-consuming, taking months to create a suitable lease for a business tenant to sign.
Often, leases can take months or even years to negotiate, draft and finalise, depending on the complexity of the lease and tenant’s nature of business. While the lease is being negotiated, the tenant can find another premises, leaving you with a huge legal bill. Once a lease has been agreed by the landlord and the tenant, it must be registered with the Land Registry.
If a commercial property has missing leases, it makes it unmortgageable when it comes to selling.
How to find a commercial tenant
When you do eventually get your property ready to lease out, you have to find a tenant. It’s much more difficult to find a tenant for commercial property than residential as it’s a niche market.
Leasing your commercial property is much harder than renting a residential home and you’ll need to do extensive due diligence on your prospective tenants.
Commercial Estate Agents
You could consider working with a commercial estate agent, but they’re going to take a cut of your profit, so bear that it mind.
Online property portals
You could also consider property websites such as Rightmove or Zoopla, if you have time. More often than not, commercial properties can be on the online market for up to a year if they aren’t in a desired location or aren’t in great condition.
Rightmove is great for residential properties but you might consider specialist commercial property portals such as Property Link. Using a specialist portal for leasing your commercial property can bring qualified tenants to you.
Sounds complicated, how do I sell instead?
If you have time on your hands, you can sell a commercial property via commercial estate agents.
Not everyone has time to wait; if you don’t either, get in touch with us. One of our expert commercial property buyers will guide you through our services, and we can give you a quick cash offer.
Sell your commercial property for cash with Property Saviour
At Property Saviour, we buy commercial properties all the time, so we know the pitfalls and what you might need to consider if selling privately or through an agent.
We are used to dealing with a range of lease problems:
- short commercial lease
- poorly worded lease
- tenant in arrears
- bad quality tenants
- illegally sublet of commercial properties
- commercial lease forfeiture
- commercial evictions and repossessions
We don’t buy properties on behalf of investors. We buy the property for our own investment portfolio. As genuine commercial property buyers, we have the ability to pay you. We’re happy to provide proof of funds.
Property Saviour can exchange contracts quickly without you having to wait months to find a buyer or tenant. As a business landlord, this helps you avoid further losses where tenants aren’t paying their rent.
It’s a huge decision to make, but it costs nothing to give us a call and chat with our experts about your options.