Posts Tagged ‘Covenant’

Commercial Rental Property

Commercial Rental PropertyIn large cities if a business needs to take space it will invariably be a lease which is available which brings me onto commercial rental property.  It is rare for freeholds to be available at affordable prices.   It is the preserve of investors, wealthy landowners and financial institutions looking for secure rental income.   Most businesses will be looking at commercial rental property.   So what are the disadvantages of rental property as opposed to freehold properties?

Commercial Rental properties are granted for varying terms.  25 year leases used to be the norm.  This was the length of a so-called “institutional lease” ie. A lease which would be suitable as an investment vehicle for a financial institution.  However, the length has been steadily decreasing and the recent credit crunch has given potential tenants the bargaining strength and brought rental terms crashing down.

Most tenants are now looking for no more than a 5 to 10 year commitment and sometimes they want shorter break options within that term.   In strict terms a lease should only be regarded as the length to the earliest break option.  So if a 10 year lease contains a tenant’s break option at year 3, then this should be regarded as a 3 year lease.  The tenant may not exercise his break but you cannot rely on more than 3 years rental income as a landlord.   There is a glut of office premises in most cities especially the secondary properties ie. Not new built offices but existing offices.   Landlords are open to negotiation.

So what terms should a tenant be seeking in the current climate? Read the rest of this entry »

Buy Commercial Property and Avoid Top 4 Mistakes That Destroy Value

Buy Commercial PropertyWhat should you be looking for when you buy commercial property?   Here are our top 4 tips to look out for when looking to buy commercial property.

1. Avoid onerous restrictive covenants

If you are looking to redevelop property or change the use of commercial property, then it is vital that you check the title for restrictive covenants.  If the title is registered (and most property is registered at the Land Registry), then for a small charge (£8.00) you can search the Land Registry records by property description or even postcode and obtain a copy of the registered title to any property in England and Wales.

You then need to look at the Charges Register which sets out all of the rights and covenants which the property is subject to.    The entries in the Charges Register will tell you if the property is subject to restrictive covenants which might affect your ability to redevelop or change the use of the property you are looking to buy.   Some of these restrictive covenants are extremely old and are worded in quaint language but they can still affect properties despite their antiquity.

So what happens if the property you are interested in buying has restrictive covenants preventing the property say, from being used other than a single residential dwellinghouse and you want to turn into a block of flats or want to sell off the large back garden as a separate house plot.    Read the rest of this entry »

Dominic Beeton, Solicitor
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