Hi, i am thinking about buying a leasehold business, the current lease is from 2006 to 2026 with rent review ev 5 years. next rent review 2011 current rent is 30.000 p.a, can anyone tell me what kind of rent rise i could expect? i have heard some people say 2-3% but then i have heard some scary stories too. The lease is upwards only.

Thanks
Zak ;)
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Zak,
I'd never recommend anyone to take over an obligation for such a long lease. If you take it over in your own personal name remember YOU will be liable for paying the rent even if the business fails.
i'll try & help but I need more information

1. What type of property is it- industrial unit, shop, office?
2. how old is it?
3. Is it a full repairing & insuring lease?
4. Where is it?
5. Are there restrictions in the lease as to what you can use the property for. This is the "User Clause"
These & other things in the lease will determine the rental value. You need to get a copy of the lease & read it carefully. There is NEVER a rule of thumb when it comes to rent so if anyone is teling you there is then they don't know what they're talking about.
I'm a Chartered Surveyor so I DO know what I'm talking about!
"Upward only" means that the rent can't go down, even if on the review date the proerty has a rental value lower than the rent you're paying. Don't fall into the trap that a lot of tenant do & accept as gospel the rent proposal. the landlord or his surveyor will hope you're "green" & just accept it. Don't. And now the bit you'd expect me to say... Take advice from a surveyor- NOT a solicitor. This is a valuation matter & not a legal one. Sols can advice on leases but in this case it is already written so you have to work with what you have no matter how onerous the lease terms are.
DON'T take over the lease without letting a professional look at it. It could be a can of worms. Also have the property inspected by a surveyor. Remember than unless the lease has a schedule of condition attached you will be liable for ALL defects and disrepair. You could end up having to carry out expensive repairs!. Also the terms of the lease & the condition of the building will have an effect on the value of the business.
If you let me have further info I'll try & help you.
Gerry
Achenstrasse
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You can expect rent reviews to move generally in line with property values. The exact increase is highly dependent upon the area, landlord etc.,

You couild expect perhaps 5% p.a. increase but you might very much be in the hands of the landlord and if they know you have a successful business might try and push the limits a little.

Take serious note of the dangers of taking such a long lease.
When you sign you are responsible for the lease payments to the end of the term 2026. Even if you sold the business if the next leasehold fails to pay the lease then you are next in line and still liable.

Never sign such a long lease without taking professional advice.
At ?0k p.a. for the next 18 years you are committing to ?40K liability, Ok someone else may eventually take it over and there might not be problems but be aware there could be.
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Yep an exit strategy is so important, if this business fails you will be stuck with a huge debt. It is so easy to believe that it will be ok, but sometimes things just dont work out for any number of reasons, illness, market changing, road works preventing customers accessing, to name but a few.
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Whilst some of Mr Cartrights comments are valid I would repeat what I said earlier. The landlord can ask what he wants but if he cannot justify the figure he has asked for then he won't get it. It's that simple. I have been personally involved advising many clients over the past 30 yrs who have had landlords wanting to increase their rent only to discover that they can't provide hard evidence of other rents in the area of the subject property.
If you provide answers to my initial questions I will try & help you . It is VERY dangerous to make a general assumption on future rental values. We're in a very unusual property situation at the moment & probably will be for the next couple of yrs. I do not expect values to increase over the next yr or two so you may well find that there will be no increase in 2011. In fact the landlord may be grateful just to have a tenant paying rent! What happens when the mkt picks up is very difficult to predict. If it's still a fragile economy then rents will stay static.
This is only my opinion but it's backed by 30 yrs pro experience.
Gerry
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Hi Again,
I forgot to mention one thing.
A landlord may see a tenant with a very successful business as a "soft touch"- ie hopefully the tenant will not want to rock the boat & upset the landlord etc. But remember this.... Rents are based on market value. When the lanlord serves the review notice he will not normally give you the evidence to support his demand but he knows that he HAS to provide evidence if you ask. He will usually also build in leeway for negotiation. If he can't provide eveidence then he'll not get the rent he asked for.
Businesses goes through good & bad times so don't agree in 2011 to pay the rent the landlord asks just because you're business is booming. Remember that the rent can NEVER go down. Come the next review your business may be doing badly & you may even be struggling the pay the current rent. ALWAYS think of the future. Also remember the level of rent effects the value of the business if you want to sell it.
Gerry
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Zak,
I'd never recommend anyone to take over an obligation for such a long lease. If you take it over in your own personal name remember YOU will be liable for paying the rent even if the business fails.
i'll try & help but I need more information

1. What type of property is it- industrial unit, shop, office?
2. how old is it?
3. Is it a full repairing & insuring lease?
4. Where is it?
5. Are there restrictions in the lease as to what you can use the property for. This is the "User Clause"
These & other things in the lease will determine the rental value. You need to get a copy of the lease & read it carefully. There is NEVER a rule of thumb when it comes to rent so if anyone is teling you there is then they don't know what they're talking about.
I'm a Chartered Surveyor so I DO know what I'm talking about!
"Upward only" means that the rent can't go down, even if on the review date the proerty has a rental value lower than the rent you're paying. Don't fall into the trap that a lot of tenant do & accept as gospel the rent proposal. the landlord or his surveyor will hope you're "green" & just accept it. Don't. And now the bit you'd expect me to say... Take advice from a surveyor- NOT a solicitor. This is a valuation matter & not a legal one. Sols can advice on leases but in this case it is already written so you have to work with what you have no matter how onerous the lease terms are.
DON'T take over the lease without letting a professional look at it. It could be a can of worms. Also have the property inspected by a surveyor. Remember than unless the lease has a schedule of condition attached you will be liable for ALL defects and disrepair. You could end up having to carry out expensive repairs!. Also the terms of the lease & the condition of the building will have an effect on the value of the business.
If you let me have further info I'll try & help you.
Gerry
Achenstrasse

Im in England
The premises are a class A3 restaurant, F.R.I and located in Glasgow,
i asked a solicitor to have a look at the lease but he advised me to use a scottish solicitor and they are'nt cheap! ?000 to take a look at the lease..does that sound right? I asked the current lease holder if they had any surveyors report from when they took on the lease to which he replied "no"... on the lease it says not to be used otherwise than for licensed restaurant or any other terms of the town and country planning (use classes) (scotland)

its does not have a schedule of condition just says obligations of the tenant and then a whole list of stuff. Im confused i know the business makes money but i dont want to fall into a trap. How much should i expect a surveyor to charge for the survey and to have a look at the lease. Or if you can help me i can do a deal with you.

Many thanks to everyone for replying to my post.
Zak
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Hi,
Because it's in Scotland I can't help you myself. ?000 just to read & advise you on the lease is to much. A good solicitor should need more than 1 to 1.5 hrs to read it & advise you but if I were you I's contact a local Glasgow firm of Chartered Surveyors & ask them to quote for reading the lease & doing a full survey of condition. Just explain that you're thinking of buying the business & they tell you what you need from them. They'll have advised clients before on such matters.
You can find Chartered Surveyors on the RICS website or in Yellow pages. One firm I know in Edinburgh is Eric young & Co. (For some daft reason when I try & post this message the site is stopping me giving you the web addresses. So google' RICS" & eric young & co.)


They may be able to advise you or put you in contact with a firm in Glasgow. I would have thought ?000 should cover an inspection of the property to check the condition AND for telling you if the lease is OK. If I was in Scotland I'd be happy to help you but I'm not.
You do not need a Scottish solicitor so don't waste your money instructing one. Your money is best spent getting advice from a Chartered Surveyor,
Best of luck & let me know if you need further help. If you can't find a surveyor let me know & I'll see what I can do in finding one for you.
If you buy the business I expect to have a slap up meal next time I'm in Glasgow- a great city!
Gerry
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