Speed up the granting of a new lease of commercial premises – six preparatory steps a landlord can take
If you’re a landlord of commercial premises who is considering granting a new lease to a tenant, the tenant is likely to go through an information gathering process about the premises to help it decide if it wants to proceed with taking the lease. The process can be delayed, which could result in financial consequences for you, particularly if important items from the tenant’s perspective are missing. This article summarises six preparatory steps you could take in advance of the lease process, which should help reduce delays.
- How the existing use of the premises is authorised: you’re probably going to be asked by the tenant for a copy of the planning permission or established use certificate which authorises the existing use of the premises. If this doesn’t exist, it can take time to obtain a certificate of lawfulness of existing use. Taking steps to obtain the certificate before the lease process starts should save time.
- Building regulations completion certificates: if you’ve made alterations to the premises which required building regulations approval, you’re likely to be asked for copies of the building regulations completion certificates evidencing that the completed works comply with building regulations. If the work has been done but the completion certificate has not been issued, time could be lost regularising matters.
- VAT option to tax: if you’ve personally opted to tax the premises, the tenant will need to pay VAT on the rent. You’re likely to be asked for a copy of the option to tax and the notice of the option given to HMRC and any notices and correspondence received from HMRC in relation to the option. If you don’t have a copy of the option to tax to hand, it can take a considerable amount of time to obtain a copy from HMRC. If you don’t know if there’s been an election to opt tax, it’s likely that your accountant would have dealt with this and further enquiries of the accountant should be made. There can be long delays if you have to contact HMRC for confirmation of the position.
- Energy performance certificates: unless your premises is exempt (e.g. it’s listed), you must commission an energy performance certificate, which will rate how energy efficient the premises are, before marketing the premises. You’ll also need to make the energy performance certificate available to the prospective tenant. Several weeks can be saved if the energy performance certificate is arranged prior to the lease process starting. If a poor rating is envisaged (F or G) you will be required to make improvements before the lease is granted
- Asbestos assessment: if you’re the freeholder and there’s no existing tenant, you must determine whether asbestos is/likely to be present in the premises and manage it, assess the risk and have an action plan and system in place for managing the risk. This is often satisfied by obtaining an asbestos assessment. It’s likely that the tenant will ask for this, which could delay the lease process by several weeks if the assessment has not already been carried out. Check first if any previous tenant carried out an assessment, as it’s likely they had primary responsibility for carrying one out whilst they occupied the premises. This will only apply to premises built before 2000.
- Fire risk assessment: it’s helpful to have a fire safety risk assessment, and implement and maintain a fire management plan, if you’re the owner of the premises and the premises are vacant. Just like an asbestos assessment, a fire risk assessment can take several weeks to arrange. This delay can be avoided if the assessment is done in advance of the lease process. Again check if any previous tenant carried out an assessment because this is an occupier’s statutory liability.