Break Clauses - use them dont ignore them

In a tenants market it is foolish for a tenant of commercial premises to not have a break clause incorporated in a new medium or long term lease. I recently heard of a retail tenant who signed up to a ten year Full Repairing and Insuring lease with a personal guarantee given on the lease by the owner of the business.

The business went into liquidation after a very short period of time and the landlord naturally came after the business owner for the rent on the basis of the personal guarantee. Now I don’t know many people who can afford to pay out £18,000 a year for the rest of a lease on a building they don’t want to or can’t occupy. Don’t forget that as well the nice Local Authority only allow six months empty rates allowance so he even had to pay the business rates.

A break clause in the lease after perhaps 3 years would have allowed the business to see if the premises suited them. After three years the owner or business could have given notice to terminate the lease under the break clause if the building was too small, too big or it was simply in the wrong location for their business.

In the situation above the failure to negotiate the lease terms properly may ultimately see the beleaguered former tenant go into personal bankruptcy. A sad end for the business owners dreams. All caused by not seeking the proper advice from a Chartered Surveyor or a good solicitor before entering into his lease.

Assigned Leases - beware

Negotiate hard when taking over an existing lease

I came across a recent case recently of a naïve shopkeeper taking on a lease of the shop he had managed for a national retailer. In the process he failed to take proper and professional advice. The National retailer had failed to maintain the building during the period of the lease and sneakily dumped the lease onto the shop manager by assigning him the lease with just a few years left to run.

Often an assignee doesn’t realise that when they take on an assigned lease that they are taking on the repairing liabilities for the whole of the lease period not just the period left which they have the benefit of. If you take an assignment of a lease with just a few years left to run then as the new tenant you must negotiate a dilapidations settlement with the outgoing tenant. Otherwise the old tenant will walk away leaving the new tenant with an unexpected repair bill of perhaps tens of thousands of pounds.

By negotiating a financial settlement to cover the cost of the repairs that have accrued during the initial period of the lease, the new tenant can at least be certain that he has some of the money tucked away in the bank ready to pay for the repairs and any additional costs at the end of the lease will be for repairs that have been arisen during the period of his tenancy only.

Take proper advice from an experienced Chartered Surveyor before entering into any lease.

Woodworm or Common Furniture Beetle

I had almost finished inspecting the roof structure of a bungalow recently when I thought I would just a last look around in part of the roof into which I had to crawl across the joists. Not easy as you get older and have gained a few pounds around the middle.

A lucky find perhaps because the only visible evidence was this one small piece of timber. It’s fairly unusual to find live woodworm in a modern property. This bungalow was built c 1950 and was habitable. The roof void was well insulated, dry and in good condition apart from these small holes and the tell tale sawdust. Most live woodworm is found in warm damp locations so finding it in a dry cool roof void is not so commonplace.

A salutary lesson maybe to Surveyors and less experienced Home Inspectors to check and check again because had my clients found after they had bought the property I could easily have been asked to answer a few interesting questions.

Dilapidations _ Understand your lease laibilities

Why a tenant should always take advice from a surveyor

It never ceases to amaze me the number of commercial tenants who do not understand the repairing liabilities of their lease. Frequently, in fact in 95% of the cases where we prepare a Schedule of Dilapidations for a landlord, the tenant does not understand what their liabilities have been during their lease. In many case the tenants have never even read their lease.

It is then very important to spend time before signing a lease to have a Schedule of Condition prepared. This can be attached to the lease to set a benchmark of the condition of the building at the start of the lease. Not having a Schedule of Condition could mean the tenant may have an unlimited liability for repairing the building.

In many cases tenants tell me the building was in poor condition when they took the lease on why should they then have to repair and decorate the building at the end of the lease. In 99% of cases it’s very simple it’s because that is what the lease says you are would do.

I have never seen a Full Repairing and Insuring lease that does not contain a covenant requiring the tenant to decorate the inside and outside of the building in the last year or few months of the lease. A reference to the condition of the decorations at the start of the lease is never made. So even if the building is poor decorated when a tenant takes it on they have a liability to hand it back full decorated.

Likewise how many tenants have a repairing covenant in their lease which says to put and keep the building in good repair? A sneaky way maybe of some landlords to get a tenant to repair the building at their expense and to keep it in that repaired condition. A new roof anyone at the tenant’s expenses.

So how can a tenant limit their liability?

Quite simply by employing the services of a Chartered Building Surveyor to prepare a Schedule of Condition of the building at the start of the lease. Make sure the repairing covenants in the lease are amended to record existence of the Schedule of Condition and that the building should be kept in no better repair than that recorded in the Schedule. Yes it may cost up to £1000 to have the Schedule prepared but that will be very small beer compared to a Dilapidation liability at the end of the lease which may run to tens of thousands of pounds.

Tenants frequently take advice from a solicitor before signing a lease but in my experience a solicitor will only provide advice to a specific question. If the tenant doesn’t know the right question to ask then they may never have the repairing liabilities of their lease explained to them.

Save a few hundred pounds at the start of your lease at your peril by not using a good experienced Chartered Surveyor and it will come back and bite you at the end of the lease.

Are things picking up??

If you follow the press then its still all doom and gloom but as a Surveyor Ive noticed that enquiries for house surveys have started to pick up. Is this a sign that the housing market is recovering a little or just the seasonal spike in the market? Difficult to tell. I have my own property on the market and things are definitely quiet and values are still dropping but this might not be the overall trend.

An interesting day today getting a survey report finished and issued and finally sending out a Display Energy Certificate to a client. Its a week of reports with several Energy Performance Certificates to prepare including a a five storey office block. Blimey I was tired going up and down all those damn stairs. I need to get a few others finished as well as this one including a large warehouse building that Ive had to do for the last few weeks. No rush though so Ive left it to one side.

Interestingly the property with the bats has resurfaced. Seems we might be getting on with the loft conversion after all.

Welcome. My first blog and first post

Can ya tell what it is yet? No well us boring old surveyors often have that problem when inspecting properties. I took this one whilst balancing in a roof and photographing into the blackness. I have to say if I had known what was in front of me at the time I might have exited stage left or more likley straight through the ceiling below. You know its not easy being a surveyor at the best of times.