BUSINESS PREMISES

Freehold Business Premises | Leasehold Business Premises
Schedules of Condition | A Salutary Tale

Buildings which are used for businesses come in all shapes and sizes. Some are purpose-built and some are converted. This conversion can be from anything from a mansion to a pig sty. No matter what its origins, any building can have problems. Add to this the fact that the very use to which the building is put can affect its longevity and you can see that it is wise not to take it on face value.

It is as advisable to commission a survey of commercial properties as it is of residential properties and we would be delighted to carry out any inspection for you whether it is a modest corner shop or a large factory/warehouse unit.

Whether you are buying a freehold title or a leasehold interest, it is important that you receive the best advice available. If you find later that repairs are necessary and your company has to meet a substantial bill, the rest of the Board are not going to be very happy! Even if you are a sole trader, there is always someone to comment on your decision - particularly if it's the wrong one! Since January 2009, all business premises have been required to be provided with an Energy Performance Certificate a very useful and helpful guide to the energy costs involved in the occupation and use of a building, particularly if it has been produced correctly. Click on Energy Performance Certificates for more information.

When you take on leasehold premises you will be required to undertake certain repairs over the term of your occupation and it is a good idea to know and record in advance the condition of the premises before you sign on the dotted line. See Leasehold Business Premises below for more infomation and also see "A Salutary Tale" for an illustrative story.

Taking on freehold premises for your own occupation has, of course, the advantage that the timing of the repairs is in your hands. However, the condition of the building may be important to your business and we refer you to Freehold Business Premises below.

Freehold Business Premises

Taking on freehold premises for your own occupation has, of course, the advantage that there is no landlord to dictate rental terms and the timing of the repairs is in your hands. However, the condition of the building should be important to your business and having some idea of the likely future repairs which will be necessary to the building is useful for future budgeting. The fee for an inspection, therefore, will be money well spent apart from the fact that it may assist in any renegotiations of the purchase price.

If, on the other hand, you are buying commercial premises as an investment, you may feel that there is no need for a survey as the tenant will have a liability for the repairs.

Well, here are a few things to ponder. First, the tenant may only be responsible for some of the repairs and you will be liable for the rest. Second, if there is already a tenant in occupation, how reliable is he at doing the repairs? Lastly, it matters not a jot if he is fully liable but goes bankrupt without doing any repairs!

Alternatively, if the premises are vacant and you need to let them, you don't want to be told by the letting agents after you've completed the purchase that there's a fortune to be spent on improvements and repairs and all the half-way decent tenants are rejecting the building until the work is done. Of course, if the agents succeed in letting the property without your doing any work, the tenant may decide to have a Schedule of Condition drawn up which will effectively create a list of repairs for which he is not going to be liable, however long he stays! The liability is down to you and it is a matter of sliding down the snake having got to the top of the ladder.

Leasehold business premises and Schedules of Condition:

Running a business is a serious matter and one of the most serious aspects is getting the right premises from which to run it. Most businesses will take a lease of premises as this commits regular outgoings rather than capital which is better used for the stock and reducing general overheads.

This document results from a detailed inspection of a building but is very different from a normal structural survey report. The structural survey report will advise you of faults, their importance and the method and, sometimes the cost, of repair. The Schedule of Condition, on the other hand, lists, very often in some detail, all the faults which exist on the day of the inspection and that's it. It is simply a list. It does not contain any advice on repairs or any costings.

So, what's the point of a Schedule of Condition? This one is easy. When you take a lease of premises you will sign an agreement which makes you liable for repairing the building during your occupation. This is, of course, only fair. (None of us likes lending a book to someone and getting it back dog-eared and with a broken back.) However, the big problem is that most buildings last longer than the businesses which occupy them and are not new when the lease starts. There needs to be a method of defining what the building was like when you first occupied under the new lease otherwise you may be required to put right faults which were in existance before you moved in.

At the end of the term, the landlord sends his surveyors along to prepare a list of repairs which he wishes to see completed before releasing you from your obligations. If there is no Schedule of Condition, it is quite reasonable for him to assume that the building was in pristine condition at the start of the lease and all the damage which is now apparent was donme by the current tenant. The Schedule of Condition is attached to the lease and can be referred to as the landlord's surveyor does his inspection.

Buildings for Businesses

• Freehold Business Premises
• Leasehold Business Premises
• A Salutary Tale