Glossary of Commercial Property Terms

The acquisition of a commercial property refers to the taking on of business premises by an occupier, whether by renting or purchase.

Warwick Bookman & Associates are specialists in acquiring commercial property on behalf of occupiers on the best possible terms. Other property surveyors specialise in acting for landlords, when they will be seeking to keep rents in an area as high as possible.

Before we start to work for any client, they  will need to supply us with certain information about their business and its ownership.

This information is required by law and the same information will be requested by your lawyers.

We cannot make any offer on your behalf without AML information held on our file, so it is in your interests to supply this information promptly; we will provide you with the details as soon as you ask us to act for you.

A commercial property solicitor is a key member of your acquisition team.

It is very important for your long term interests that the solicitor acting on your behalf is a specialist in commercial property.

If you don’t already have such a solicitor, we are able to make a recommendation.

When negotiating a rent review on your behalf, our experts will look at comparable evidence, these are recent similar transactions in the local area.

In Clerkenwell, we have done more showroom acquisitions than anyone else in recent years, so much of the comparable evidence will be at our fingertips. Other evidence will be gathered from our colleagues in the industry.

We also look at comparable evidence when making initial offers or negotiating a lease renewal.

Any offer that Warwick Bookman & Associates make on your behalf will take into account both comparable evidence and trends in the marketplace. When rents are falling, the security of having a tenant in place is valued by the smart landlord. See our article on landlords waking up and smelling the coffee in a falling market.

Covenant or ‘covenant strength’ is a term used to describe how well established and profitable a business is.

If two prospective tenants make comparable offers to rent the same space, it is likely that the landlord will accept the one with the strongest covenant.

When we start working together, you will be asked to provide your last 3 consecutive years’ accounts. You need to provide this information promptly and it will be forwarded with any offer.

If your covenant is weak, for example if you are a new business, you will most likely be asked to pay a rent and service charge deposit, normally plus VAT.

A tenant’s dilapidations liability is the obligation to return the premises in the same condition as they were originally acquired.

When vacating a commercial property, either at the end of your lease or when breaking your lease, we strongly recommend working with a specialist dilapidations surveyor.

Your dilapidations liability can stretch into hundreds of thousands of pounds and having an expert on your side will ensure that your costs are mitigated.

Warwick Bookman & Associates have successfully negotiated dilapidations down for clients such as K+N.

The headline rent is the cost per square foot or per square metre that you will be charged to take on a lease.

Landlords and their agents like to keep the headline rent as high as possible it affects their income and the agent’s fee. It is also a key factor in determining the value of the building.

While we like to keep the headline rent as low as possible, we are even more concerned about your overall outgoings. We may therefore accept a high headline rent on occasion if we are able to get other concessions on your behalf, such as a substantial rent-free period and other beneficial terms.

When we have agreed an offer to buy or rent a building on your behalf, the terms of the deal are documented in the Heads of Terms which then go forward to the lawyers for both parties.

Some surveyors produce quite a skimpy Heads of Terms, ours are generally in more detail because we want to be certain that all the clauses protecting your position will be included in the final contract or lease.

An off-market transaction is one which is concluded without the property having been openly marketed.

Because of the substantial number of deals we have completed, especially for furniture manufacturers and distributors in Clerkenwell, we are offered many properties off-market. People with a good space to rent or for sale know that we always have clients in the market.

While landlords’ agents don’t particularly like how hard we negotiate on behalf of our clients, they do appreciate that we have genuine, established businesses as clients and that we work hard to shepherd deals through the legal process and ensure that property acquisitions are concluded successfully.

Some of our clients who have benefited from off-market deals include leases to Nowy Styl, Wagstaff and Spacestor.

We also identified 28 St John’s Lane before it came to the market and offered the freehold purchase opportunity to our longstanding client, Gresham.

If you take on an existing lease, passing rent is the rent currently payable, pre or post rent review.

The market rent may have gone up or down since the passing rent was agreed.

Where the passing rent is higher than the market rent, we may be able to negotiate a reverse premium for you to take on the remainder of the lease.

The rent-free period is at the start of a lease or after a break. This is a period during which an occupier is not expected to pay rent, but you will be expected to pay rates and service charge.

This is to allow you time to get the property ready for your occupation and will allow for market incentives.

Where the passing rent is higher than the market rent, we may be able to negotiate a reverse premium (cash payment) for you to take on the remainder of the lease.

Our article What is a reverse premium and do I want one? explains things in more detail.

A Schedule of Condition is a document which contains photographs and text to describe the state of the premises at the beginning of a lease.

This schedule can help to reduce your dilapidations liability.

We will provide one of these documents for a separate fee.

At the end of your lease or if you have chosen to break your lease, your landlord will provide a Schedule of Dilapidations which outlines the work he expects to be undertaken in order to restore the premises to their original condition.

We work with specialist surveyors who can negotiate the dilapidations liability on your behalf and this process will be helped considerably if you have a Schedule of Condition in place.