Top tips for your first retail lease
So you’ve got a great retail business idea, you’ve got the funding and now you need some retail space. What could go wrong?
Hopefully the process will be smooth, but for additional peace of mind here’s a guide from an experienced property solicitor on some points that commonly crop up on lease transactions that would-be retailers may wish they’d thought about…
Will you need unexpected planning or listed building consents?
Sometimes the most attractive sites can be more expensive. If the property is a listed building for example, your alterations to the property may need listed building consent from the local planning authority. Similarly, in a conservation area, changes to the external appearance require planning consent. Obtaining these consents takes time and can increase costs. This is not insurmountable, but you need to build these costs and delays into your timeline.
Get started early on your fit-out-plans
It is wise to start preparing your fit-out plans for the landlord’s approval early. Landlords are understandably keen to get you to ‘complete’ as soon as your solicitor has received your property searches back and has agreed the form of lease, whether or not you have your fit-out plans ready. Some tenants are pressured into completing their lease by landlords before they are ready to start fitting out or risk the landlord remarketing the property. Property searches can take around four to five weeks so whilst you do have some time to get your plans ready and approved, time is tight.
Getting broadband into a unit is often an afterthought. Before a new connection can be brought into a property, the landowner (usually the landlord) needs to sign a ‘wayleave agreement’ with the telecommunications company. Sometimes the landlord also insists on using their own form of wayleave agreement and requires that the tenant also signs this. All this takes time and is often the last thing to fall into place in a lease transaction. It is best to start the process as soon as possible so that the landlord and broadband provider don’t hold you up.
At the start of any lease transaction it is advisable to ask your solicitor to provide you with an indication of the amount of Stamp Duty Land Tax (SDLT) and the Land Registration fee that you will pay so that you can factor these costs in. The SDLT must be paid to HM Revenue and Customs within 14 days of the ‘effective date’ (usually the date of completion / occupation), so you will need to budget for this. The SDLT calculation can be complex, particularly if you are taking a turnover lease.
Heads of Terms
Some Heads of Terms (HOTS) include onerous provisions that unfairly favour landlords. We recommend that you send the draft HOTS to your solicitor for their comments before you or your agent agrees the final form of HOTS. For example, seemingly innocent wording in a break clause or ‘assignment’ clause can have costly implications later on due to case law and legislation.
We at BDB Pitmans are happy to assist you with your review of draft HOTS and to advise on other aspects of your lease or property acquisition.
We also offer a full service to any prospective retailer or business owner, from advice on setting up your business to advice on employment and on protecting your brand and intellectual property. Please visit out entrepreneurs page for more infomation.