Hidden costs in commercial lease agreements
When reading through a commercial lease agreement it can be easy for tenants to solely focus on the monthly costs, and overlook any other charges that are involved. It’s common for tenants to be caught out by these additional costs which can have an impact on their overall budget.
Service charges in commercial leases
The main unexpected charge that is common in commercial leases is the addition of a service charge. Ultimately, the specifics of a service charge will depend on the property, landlord, and lease agreement, however they generally relate to shared areas of a property such as lobbies, foyers, stairwells, communal kitchens and toilets, lifts, car parks, but this can also extend to drains, roofs, and building insurance.
If a commercial landlord employs a third party to maintain any of the above areas such as a property management company or individual contractors, then the service charge will also cover their fees.
Even if the tenant doesn't plan to use a communal outside space, or their share of a building is on the ground floor and they don’t need to make use of a lift or stairwell, they may still be asked to contribute. These contributions are usually either split evenly between all tenants or can be proportional based on the size of the space being rented. It’s a good idea to understand how these figures are calculated, how much they could increase by and who covers any deficit if there are vacant premises within a shared building.
Building survey for commercial leases
Another hidden cost that can catch tenants out is the cost of carrying out a buildings survey - either prior to leasing a premises or at the end of the tenancy.
Rather than just letting the landlord determine what the current state of the premises is, many tenants like to use a buildings surveyor to highlight any defects or areas of disrepair in the property. Whilst this isn’t necessarily in the contract and can seem expensive, it can save a vast amount of money by helping your defence when negotiating a limitation on dilapidations.
Similarly, some landlords will have it written into contracts that a buildings survey is necessary at the end of the lease agreement and that the tenant must foot the bill. Ensuring that the tenant has the freedom to shop around for an independent surveyor who is competitively priced is also important.
It’s quite common for tenants to overlook both ongoing property management costs and external surveying fees in the rush to sign on the dotted line.
However, employing the services of an experienced commercial property solicitor can ensure that the tenant is fully aware of any one-off and ongoing payments that they may be responsible for.