Leasing a commercial premises advice please!

kit

Hi all
Am thinking of starting a retail business. To do this I need to lease either a shop or industrial building.

Have looked round and have found a few suitable premises but need some advice before I go any further.

Obviously I have to pay rent on the premises .... these vary between 11 and 20k pa. Do I need to pay this upfront or on a monthly basis? Because people are struggling to fill empty building most of them offer a no incoming fee .... I presume this is good?!

What is a standard lease agreement with regards to length and get out clauses?

How are business rates paid? Monthly like council tax??

Any other info you think I will need would be gratefully received

Thanks.
Kit

jexygirl

First and foremost, never pay what they are asking, specially not in this climate - there is always room for negotiation, and he who speaks first loses!
The rent will be down to location in most cases, so choose carefully - most want 3 months in advance then 3 monthly thereafter, and most also want a deposit as security on top.
There is no ingoing fee unless you are buying a business, that is normal. You wouldn't pay for something that doesnt exist - you are simply renting the unit in order to start your buisness.
There are no standard leases or terms - and the same for get out clauses - get solicitors advice and / or read what the landlord requires - then negotiate so both of you are happy.
Business rates are none existant for rateable values under a certain figure - someone lucky enough to be in that bracket (think its about 10k but dont quote me!) will tell you what it is, but it affects many small buisnesses, so its likely you will not pay buisness rates.

You will pay a miriad of other things, waste management, if the lease is part of a group you may need to contribute to services / repairs to communal areas, there is also whether its a fully repairing and insuring lease, in which case you need to do a schedule of delapidation before you take it on to make sure you get your deposit back at the end and dont end up repairing a building that was poor to start with - you can - as we did - insist any work is done before you take over, and you leave it as you find it basically - but ensure in writing what the current state is.

What sort of capital do you have to get started - because whatever your buisness plan says - double it! Thats enough to be getting on with - there will be more exacting advice to follow from everyone Im sure.

Jex

bris

There are not many retail businesses that do well in industrial buildings, so unless it is a niche market that people will come to you, then don't take on an industrial unit.
You should be looking for about 6 months rent free in this climate, and if the unit has been empty long enough there maybe scope for a reverse premium. You will be needing a get out clause, try for a year but if not make it two max.
Don't just go for a unit because it's cheap, it's cheap for a reason, location is everything in retail. There are a lot of expences you have not even considered yet, so any figure you have in mind,i.e rent and rates, you can add a lot more on top for insurance, both you own and LL buildings, waste, phone, bank charges, pps, prs (if you want to play music) alarm, merchant services, water, electricity, gas, etc etc the list goes on. It can be quite scary when you open up only to realise you didn't account for this or that.
Commercial leases are also full repair and insuring leases so all repairs are down to you, jexygirl gave you good advice on that one, so inspect the unit well before you sign anything.
Research the area you are interested in, you have to find out if there have been any other similar businesses in the area that have failed, this would be a good indication whether your's would work or not.
Spend a weekend in the choosen area at the peak times to see what the footfall past your chosen site is like and don't be scared to pop into a few of your neighbours to ask how they are doing. Be polite and as long as you make it clear you are not a competitor they may be up front about you chances.
Good luck.

Savvy_Sue

Also before you go for a rent, make sure you know you've got the right planning consents in place: an industrial building may not have retail permission, although you may be able to get it fairly easily. Problems start when you assume you can, and find you can't ...

paulwf

As I always say in this situation - get yourself a property acquisitions agent and get them to do all the talking for you. Commercial leasing is best left to the experts to deal with as it is such a specialist area of business. The cost of an agent will be recouped many times over by the deal they will get you.

An agent will also find properties that won't appear on the open market, my experience is that landlords and the commercial lettings companies they use won't talk to an individual. To get the good properties you need a person with the right contacts and clout.

Anyway, a lease is a huge burden as you have to keep paying it even if the business closes. Nearly all leases will require a personal guarantee. Sure there is a break clause somewhere along the line but to get the good deals this can't be that early into the contract. Also, a break clause 1 year into a 10 year lease might not help you as you might need a couple of years to build the business and see if it will be profitable...you're then stuck for 8 years. Basically don't rely on break clauses as being some miracle solution.

Is there any way you can trial your business without a lease? A short term let would be ideal. That way you'll know exactly what property you require down the line and what sort of rent you can afford.