21 August 2019/ rent_retail_guide

Top 7 tips when taking on leisure premises

From understanding commercial property classifications to knowing the right questions to ask, make sure your new venture gets off to a flying start

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Whether you’re after a restaurant, pub, gym or hotel, when it comes to renting commercial leisure property, it’s advisable to familiarise yourself with as much knowledge as possible before sealing the deal. After all, whatever venture you’re embarking on, your business will be more profitable and easier to run if you pick the right property to rent. Here are our top leisure property rental tips:

1. Learn your property A, B, Cs and Ds

Get to grips with the different classifications. Commercial property is divided into use classes under the Town and Country Planning (Uses Classes) Order 1987. This legislation determines how each commercial property is occupied – so make sure that any business you’re planning to operate is in line with the building’s designated planning use. If you’re looking at leisure property, the ones to focus on are:

A3 – Food and Drink: Restaurants, pubs, snack bars, cafés, wine bars, shops for sale of hot food.

A4 – Drinking Establishments: Premises where the primary purpose is the sale and consumption of alcoholic drinks on the premises.

C1 – Hotels: Hotels, boarding and guest houses.

D2 – Entertainment and Leisure: Cinemas, music and concert halls, dance, sports halls, swimming baths, skating rinks, gymnasiums, other indoor and outdoor sports and leisure uses, bingo halls, casinos.

2. Location, location, location? Research, research, research...

Along with ensuring the building’s purpose fits with your plans, picking the right location is essential to how successful its likely to be. For example, if you’re looking at gyms or restaurants, you’ll want to ensure the area has a high footfall, good transport links so it’s easy for staff and customers to get to, decent parking and workable delivery facilities. Check out the market and investigate other businesses in the area – could they supply you with trade by attracting consumers to the location, or will they be competitors? Is it an up-and-coming area that’s welcoming new ventures – or are things on the downturn? You don’t want to kick off your big idea in an area where everyone is shutting up shop. Look out for incentives and initiatives in the region, such as Business Improvement Districts (BIDs), Enterprise Zones and Local Enterprise Partnerships (LEPs), which could provide a useful boost to your business.

3. Planning to redevelop? Get the local council on-side

It’s advisable to double check that any commercial property you’re considering renting has the planning permission for the business you’ll run. If you’re considering redeveloping the building or altering its intended use, you may require planning permission. There’s a comprehensive list of use classes on the Planning Portal the planning and building regulations resource for England and Wales. Be aware that if you want to make alterations, you may need to get consent from your landlord first. Before you start any works, always seek advice from the local council and a commercial estate agent on how feasible your intended plans are.

4. Take a really close look at the building itself

Just as if you were renting a house, it’s essential to check the overall condition of the leisure property you’re looking to rent. Look out for the usual damp, cracks and plumbing issues and, if there’s any equipment installed, check it’s fit for purpose. It’s advisable to have a building survey carried out so you’re fully aware of the property’s condition and any likely repair or maintenance costs. A survey normally details all aspects of the property, including the walls and floors. It will also flag up anything that’s not been inspected and causes for concern. It’s also a good idea to set up a Schedule of Condition report to detail the exact condition of the property, using photographs, and attach it to the commercial tenancy agreement.

5. Decide how much rent you can realistically afford

The level of rent is one of the most important questions to ask when looking at commercial property. Commercial rent is normally paid quarterly in advance, although landlords are increasingly accepting rent payments on a monthly basis. Any service charge or insurance will usually be billed along with the rent. You may also be asked to provide a guarantee for the rent and other obligations if your business is young or small. Always research rental trends and forecasts and seek the advice of a commercial estate agent about how much you should expect to pay.

A lease – particularly if it’s a long one – may include rent reviews, typically every three, four or five years, which can affect how much you’ll pay over the coming months and years. You’ll typically secure a commercial property for rent by signing a lease agreement. A lease is a legally binding contract which sets out the terms and conditions of the tenancy agreement between landlord and tenant. The average length of a new lease is now 4.5 years compared to 6.8 years in 2003, according to the Property Data Report 2014. However, it can be 25 years.

Leases have become more flexible in recent years. Rent-free periods have become more common, as have break clauses, which give you and the landlord an option to serve notice during the tenancy without facing a penalty. You should give your landlord two months’ notice if you plan to exercise your break clause. Your landlord can only use it if you agree.

The Royal Institution of Chartered Surveyor (RICS) advises taking particular note of what the proposed contract contains on service charges, rent reviews, subletting space, assigning the lease, repairing and decorating obligations and personal guarantees. 

6. Don’t forget to factor in other costs

Along with the rent, you’ll need to calculate business rates (a tax on non-residential buildings in England and Wales) as these are typically paid by tenants. The local council sends the business rates bill in February or March each year for the following tax year.

In addition, you’ll typically be expected to cover all or part of the service charges on the commercial property for rent. Service charges tend to include the maintenance of common parts of the commercial property and a share of any repair or redecoration work. If your landlord is responsible for insurance, you may be required to share the cost too.

7. Know all the right questions to ask

Before you sign a tenancy agreement on a commercial property to rent, these are the essential questions to ask the landlord:

  • How much is the rent? Are there any rent-free periods?
  • When and how will the rent be reviewed?
  • How much are the business rates?
  • What other costs do I need to pay (such as service and maintenance charges)?
  • When and how will bills be paid?
  • How long is the lease?
  • Are there any break clauses and if so, when?
  • Can I assign or sublet the property?
  • What are my key responsibilities?
  • What property services do I get?
  • Can I renew?

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