Stamp Duty Land Tax
(SDLT) is charged on land and property transactions in the UK where an transfer in the interest in the . The tax is charged at different rates and has different thresholds for different types of property and different values of transaction. The tax in mandatory and is paid by the purchaser. Other factors within a lease, such as rent free incentives, may have a bearing on the level of SDLT to be paid. Be aware of penalties for late payment!
Survey of the premises
RPS regularly recommends that a survey be undertaken prior to completing on the lease. This is to establish it’s structural integrity and the quality of the services and finishes that often leads to a better understanding of future property costs. This is especially true for longer leases where higher capital costs for plant replacement or roof replacement may be required. Being informed up front helps negotiations. This could lead onto a schedule of condition that will assist with dilapidations settlements.
Landlord’s approval for alterations
In a majority of cases, before a tenant may undertake any non-structural alterations to their leasehold property, they must receive formal consent from their landlord for such works and the mechanics for this will be set out in your lease. See our notes relating to qualified consents. Expect fees for both landlord’s approval and solicitor’s fees. In some cases the landlord may use a surveyor and consultants to consider your proposal and may not even entertain starting to review this before getting your undertaking to pay all reasonable costs.
Service charge increases.
Probably one of the more contentious occupancy costs as tenants often complain of seeing the charge but not the service. The landlord’s costs for running their property are not always fully recoverable from the tenants and we strongly recommend tenants keep a close watch of the charges raised and where they are spent.
Survey of the premises
RPS regularly recommends that a survey be undertaken prior to completing on the lease. This is to establish it’s structural integrity and the quality of the services and finishes that often leads to a better understanding of future property costs. This is especially true for longer leases where higher capital costs for plant replacement or roof replacement may be required. Being informed up front helps negotiations. This could lead onto a schedule of condition that will assist with dilapidations settlements.
Dilapidations
Simply this involves the tenant reinstating their office in to the same condition that it was in when the lease first completed. However in practice it is more complicated and understanding of the lease terms and the legal definitions is essential. You should factor dilapidations costs into your exit costs and we always suggest tenants start to consider their exit and dilapidations strategy a good 18 months prior to lease expiry.
Superior landlord’s consent to approve sub-letting or assignment
In a similar manner to consent for alterations landlords often wish to ensure that any subletting or assignment of a part or entire demise/lease will require their consent. Again, expect the landlord to seek your undertaking to pay these beforehand (even if the request is declined!).
Refurbishment / Fit out costs
Clearly these will be dependent on the level, quality and extent of the proposed works. However, even when the costs are clear, tenants often overlook the time taken to complete that eat into their ability to trade from the premises. Therefore RPS ensures that the best incentives are achieved and savings made where they can.
Business Rates increases
As with Service Charges, business rates are another contentious charge for both occupiers and owners. See our previous notes for how they work. Rateable values are recalculated every 5 years and based on your rental valuations at the time of calculation. There are provisions for reducing your liability and we have previously issued guidance on this. See our blog summary.
Rent reviews
These are often a 5 yearly intervals and very much subject to market conditions. Even in a poor rental market it is just as important to complete the recording of a nil increase to close the matter. Leases that extend beyond five years will usually be subject to a rent reviews and it is important to read and understand the lease terms that should set out the mechanics of the review that is strongly evidence based. This applies to both new leases and to subleases.
VAT
Is your property VAT applicable that will be attracted by the rent, service charge & rent deposit?
Building’s and terrorism insurance
It is often a landlord’s responsibility to insure the building but will recover the premiums from tenants ofen outside the service charge account. Again, check the lease for the provisions and recoverability.
Contents insurance
Not often a landlord responsibility but is clearly another charge of occupation. Make sure you are sufficiently covered. That is not too much over and certainly not under insured! The test of a good insurer will be when it comes to making a claim and not necessarily on the premium level.
Solicitors’ & agents fees
When going through lease negotiation and drafting be clear as to how is paying the solicitors fees. RPS will argue that each party pay their own fees. Unless it suits our client otherwise of course!
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