Business Planning
office in to the exact condition that it was in when their lease first completed.
3. Refurbishment / Fit out costs: estimated between 15 - 65 per sq ft
5. Superior landlord’s consent to approve sub-let/assignment of a
of the net floor area A variable cost entirely dependent on the needs of an individual business and the level of quality that they require from their office design/fit out. On top of that you have a survey of the premises, estimated to cost around £750-£5,000 depending on the size and condition of the premises. A building survey is recommended to assess the structural integrity and services of the building. A survey is particularly necessary if the lease will be a fully repairing and insuring one (FRI). Any issues that the survey brings to light will then need to be dealt with in advance of the lease completing by the tenant’s representatives and advisors.
4. Schedule of Conditions where
appropriate: £1,000 - £2,000 If the condition of an office at the start of a new lease is anything other than fully refurbished, then that condition should be documented by a series of photographs with written commentary against them.
lease: £500 - £3,500 Any subletting or assignment of a part or entire demise/lease requires the consent of the superior landlord before it can legally complete. The superior landlord usually has an obligation to not unreasonably withhold or delay their consent, providing that any potential restrictions regarding subletting or assigning within the head-lease have been met and adhered to.
6. Rent reviews (every 5 years based on a new lease): dependent
on market conditions Leases that extend beyond 5 years will usually be subject to a rent review every 5 years. This applies to both new leases and to subleases. At the time of review, advisors to the landlord will inform them of relevant evidence about available and completed deals on offices in comparable buildings.
7. VAT: payable on rent, service charge and deposit (where applicable) for VAT registered buildings at a current
This Schedule of
Condition needs to be agreed by both tenant and landlord and appended to the lease before its completion.
rate of 20% The great majority of buildings in the UK are elected for VAT. In certain cases a landlord may wish to not
elect their building for VAT, usually to make their building more appealing to occupiers that are unable to recover VAT. Buildings located in the EC3 postcode of London are the most relevant example, due to the larger number of commercial occupiers from the financial sector (that are unable to recover VAT) being based here.
8. Building and terrorism insurance
estimated 0.50 - 1.00 per sq ft It is a landlord’s responsibility to insure the building, though they then recover these costs from the tenant(s) of the building sometimes in the form of service charges.
Also, insuring the
contents of a specific demise is the responsibility of the tenant and covers any losses/damage that may be caused by circumstances such as theft and water damage.
9. Rates increases: every fifth year with the most recent April 2010 and based on office rental values two years prior to the fifth year re-
valuation. The business rates payable are derived as a percentage of the Rateable Value (RV) of a building and then scaled against the percentage of occupation within a building that a tenant leases. Currently the rates payable in England are based on 43.3% of the RV. In the City of London they are 43.7%.
10. Solicitors costs: estimated £2,000 –
higher depending on size of office £8,000 (potentially
and structure of the lease term) Usual practice in respect of any new lease direct from the freeholder of a building is for the tenant and the landlord involved to cover their own legal fees incurred. It is a point of negotiation over who pays the landlord’s legal and also professional (such as surveyors) costs. Also, as with any professional service, it is a simple untruth to term agents’ fees a cost, both landlord and tenant pay their own fees.
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