New Premises, How to work out monthly cost?

mikeopvc

I'm thinking of expanding the business and leasing an industrial unit but can't work out the monthly cost what with rent, rates etc.
If possible could anyone help with the calculations?
What does rateable value mean and how do I work it out?

I saw an advert for a small unit and just need to know what the overall monthly cost would be.

Here are the rates & terms:

RATES –

Rateable value for the unit is £2,560.00 with the rates payable for 2010/11/09 of £1,083.85 which is then subject to a Small Business Rates Relief as the Rateable Value is under £5,000.00. This gives a Net Rates Payable of £812.89 (£81.29 P.C.M.).


TERMS –

Unit 3 is available on a new lease (18 Months or longer) and at a rental of £3,250.00 Per Annum (£62.50 Per Week), plus 12.5% Service Charge, making £3,656.25 per annum (£70.31 Per Week), + VAT making £4,204.69 Per Annum (£80.86 Per Week).

Six months rent is payable in advance and the tenant will remain six months in advance with their payments – payments can be made monthly or quarterly in advance and VAT invoices will be issued for all payments. The six month payment in advance will be returned to the tenant on completion of the lease and the premises being handed back in the condition in which they were originally occupied.

The Lease will be drawn up on full repairing and insuring terms (main walls and roof excepted) and the 12.5% Service Charge is for the landlord to maintain the retained common area, common services and building fabric.

Additional Info:
NEW LEASE AVAILABLE -

18 MONTHS Minimum

RENTAL: £4,204.69 Per Annum

Inclusive of 12.5% Service Charge and VAT


Thanks

Mike

paulwf

The rental figure including VAT is incorrect as it is using a VAT rate of 15% not 17.5%. Remember it will be rising to 20% soon. Obviously if you are VAT registered in the long run it won't matter anyway.

paulwf

Your rent is £3,656.25 and your rates are £812.89 pa. This gives a total monthly charge of £372.42 ex VAT.

You will also need to find out what the service charge covers, does this cover refuse collection for example? What will your electric, gas, water, telephone and broadband charges be? Also remember all the little things like annual fire extinguisher checks and perhaps a PRS music license that all add up.

To complete the lease you'll need a solicitor. As the lease is fully repairing I would strongly advise getting a surveyor to check the premises and add any exclusions to the lease as necessary. You will also need appropriate insurance and you may have to cover a portion of any buildings insurance the landlord holds.

mikeopvc

OK thanks for that,

Is there an easy way to work out the cost of electric, gas, water telephone & broadband etc. for a small unit like this?

I have never had a premises before as I work from home so I don't even know what a PRS music license is.

paulwf

The main thing to mention is that business services cost more than domestic even if it is for the same product (think of it like mentioning the word "wedding" to a party venue)!

Chances are the unit won't have gas so check on that then exclude if applicable. You can get prices for broadband and telephone from the BT site as a rough guide. Electricity will depend on how many hours you are in the unit, whether you require heating, what machinery you have etc. I would be cheeky and try and ask occupiers on neighbouring units. As I said before check what the service charge includes as business rates don't cover things like refuse. You'll also have to check if each unit has separate meters.

A PRS license covers playing music in a public area i.e. if you have staff or customers. That's a whole can of worms so I won't mention that in depth. The main take home message though is all the silly little things that you won't even think of add up to a significant chunk.

This is VERY rough and ready but you're probably looking at a touch over £500 pm all in. A chat with an accountant would be a very good first step.

A surveyor and solicitor to complete the lease is guess the number...possibly £1-2K in total.

(All figures ex VAT)

daveyjp

"The Lease will be drawn up on full repairing and insuring terms (main walls and roof excepted)"

I've found the property you are looking at.

The info says the 12.5% service charge is used for repairs to roof and structure, therefore they are not excluded. They are responsible for the repairs, but you are responsible for paying for it, so it is FRI - nothing is excluded. The above statement gives the impression you are not responsible.

The units are new so you should be OK on the fixtures and fittings and testing front. It may require wiring to your specification. New units often only have limited power and sometimes no lighting.

I'd need more info on the service charge - how much of this is spent every year? Ask for the latest copy of the tenants service charge account.

You need to know what the 12.5% is being spent on as it's not normal to charge a percentage of rent as a service charge, it's usually £x per sq ft. This figure should be adjusted every year to reflect the costs incurred.

From October 2010 properties with RVs below £6,000 get 100% relief until April 2011.

Get a proper solicitor or surveyor involved to act for you - £1,000 spent now could save you in the long run.

Get a condition survey done too as your deposit return depends on the condition of the unit at the beginning of the lease.