Everything you need to know about renting a commercial property.
When you are renting a commercial property, most of the time, you will have to consider to acquire the lease from an existing tenant. Transferring a lease can be a long process requires three parties to be involved (you, vendor and landlord) and it’s important to grips with what is required at an early stage, to learn the legal terminology, the documents you will be asked and how to prepare a landlord’s pack, to pitch your project and describe yourself.
As an existing tenant, the seller is selling you the right to occupy the premises for the Term (which is the remaining length of time agreed on the original lease) and the landlord will have to approve you as a new tenant as well.
The Landlord will ask for references
in order to scrutinize your capability to honor the terms of the lease. The agent collects the references and will assist you organizing them carefully.
The references include passport, details f the company, bank account references, business plan, and details of the director of the limited company that will act as guarantor. Once the Landlord’s receive approval, she will also provide the vendor with a Licence to Assign signed by the buyer, landlord, and seller.
As you can see, this involves different parties: buyer, seller and Landlord and their own solicitor. It’s therefore crucial that the communication is smooth among the parties to avoid any delays, resolve queries and satisfactorily resolve conferences.
THE COSTS TO REASSIGN A LEASE
When you buy an existing lease. Than you will more likely have to pay a Premium. So which will buy you the fixtures, fittings, and goodwill in transferring the lease.
The parties will also have to appoint a solicitor. We always advise our clients in asking for a fixed price for their lease fees, in order to have a certain degree in controlling to legal costs involved and avoid a massive bill.
There are also some further costs you have to consider, which includes:
- Rent Deposit – It’s a further security for the Landlord and is equivalent to 3/6 months of rent.
- Land Registry and other searches fees – the amount is usually between £500 and £3,000.
- Fee for Notice of Assignment – this document confirmed to the Landlord the date the legal transfer took place and costs around £50.
- Landlord’s Legal Fee – the costs for the Landlord’s solicitor due to be part of the negotiation are due to be paid by the buyer, which can split the costs with the seller as part of the negotiation. The money will be wired upfront as the Landlord will require an undertaking the funds are held on account and that their costs will be paid before they instruct their solicitor to undertake any work on the matter.
HOW DOES THE TRANSFER WILL HAPPEN?
As soon as we instruct the buyer and seller’s solicitor. Therefore they will work on the due diligence to ascertain the health of the business. And they will draft the Sale Purchase Agreement. Industry standard forms as CPSEs (Commercial Property Standard Enquiries) are for this purpose.
Other required documents are The Licence to Assign. The Deed of Assignment (for unregistered leases) or Transfer (for registered leases). The Rent Deposit Deed and Authorised Guarantee Agreement (they might be also incorporated into the Licence to Assign).
Once the buyer has received responses to all
of the enquiries in regards to the business and premises and any other resolving queries . So the drafts and legal documents are in place.Therefore the parties can exchange contracts and at the point. And they are legally obliged to conclude the deal.
Exchange and completion can happen the same day. But usually, completion takes place a few days after to complete some. So other formalities including the payment of Stamp Duty Tax and registration at the Land Registry.
Do you have other questions in regards to how to transfer a lease? Leave a comment below and our team will come back to you with the answers you need.