Business leasehold

*depressed*

Hi, I know this isnt in the right section but I am not sure where else to put it?

My brother is looking to open up a shop, area is good for the shop he wants to open and my mam will be helping him as she has experience in this area but from a long time ago when she just rented the property.

Basically the information on the propery says leasehold £55,000 the rent is £3008 pax and the leasehold is from the council from 1998 for 21 years.

Can anyone tell me how the leasehold of £55,000 works? is this the amount over the 21 years, or what would be left etc

We are going to ring the agents its up with but they are closed until tuesday and i cant find much on the internet but maybe i am looking for the wrong information

xxx

Jowo_2

Landlordzone has a commercial property forum so presumably has members there more experienced in those matters.

Annisele

http://www.colemans-solicitors.com/site/publications/commercial_leases_explained.html gives some information.

In principle it's just like buying a leasehold flat (though lots of the terms of commercial leases will be very different).

Is it a 21 year lease from 1998 (i.e. 9 years remaining), or are there 21 years left? If there are 9 years left, then to use the property for 9 years you'd need to pay £55k, plus 9 annual rents of £3k, plus any rental increases and other costs - in other words, at least £82k over those 9 years, or a bit over £9k per year.

marcg

£55k to buy the lease on the shop for 21 years at £3005 a year rent.

So £55k upfront and then £3k a year.

Look out for the terms - reversionary means it goes up every year. This can be linked to inflation (RPI or CPI is important - one is always higher than the other) or it can be a fixed increase every year. Or it can be anything the solicitors think of, but whatever it is, your brother will have to live with it for the next 21 years.

There will be break clauses - points in the future at which he can get out of it.

There will also be rent reviews - points at which the rent can go up (in line with the stuff I wrote above).

There will be terms to do with full repairing and insuring - meaning whatever condition he gets it in, he must return it in as good or better and he must maintain insurance for the building.

Also watch out for rates - council tax for businesses. Find out how much these are.

Finally, if the shop has been empty for a while, be bullish and ask about rent-free periods. In order to get someone to sign up for 21 years, it's not unknown for a landlord to give one or two years rent-free so that your brother can invest in his business at the start.

Edit: Just read Annisele's link - much better explanation than mine - read that instead.

ciano125

I havent heard of anyone taking a lease for 21 years recently. 15 years max with a break at 10, but more likely 10 and a break at 5 if not a straight three year term.

What is the current rental value of the property? If the rent should be say £10k pa, and you can get it for £3k pa, that's why you're paying a premium (£55k) up front, but either way, 21 years is a long time.