Best and final offer from landlord...does this mean do or die?

[regina]

Hi All,

After an exchange of offers, we were given the best and final offer by the landlord/estate agent (subject to contract and planning permission). Does this mean take it or leave it? or can we still give our best and final offer too? Would appreciate your thoughts...

Term: 10 year lease (they wanted 15 year lease but they finally agreed to 10. We initially wanted 5 years but after careful consideration decided that 10 is okay with a break at year 5)

Break Clause: Tenant's break at year 5 on 6 months' prior written notice

Rent: Year 1 - £8,000 pa (against our £7,647.50 pa offer)
Year 2 - £9,000 pa (against our £8,050 pa offer)
Year 3 - £10,000 pa (against our £8,452.50 pa offer)
Year 4 - £11,000 pa (against our £8,855 pa offer)
Year 5 - £12,000 pa (against our £9,257.50 pa offer)

Rent Free: 6 months (they offered 3 but we asked for 9 months and now it's 6)

Rent Review: Review to £12,500 pa (against our £9,660 pa offer) at the end of year 5. Thereafter linked to RPI with a collar and cap of 1% and 5%.

Lease: FRI Lease (payment made to the Landlord for insurance and exterior repairs through the s/c) (we asked for Interior Repairing twice) to be contracted 'inside' (used to be outside but he agreed to inside) the L&T Act 1954

Deposit: 6 months +VAT based on the average rent (Accounts to be provided a guarantee may be required) - (this doesn't seem fair as 6 months deposit negates the 6 months' rent...)

We calculated it and the landlord's best and final offer appears to be 17% less from the asking price, is this reasonable/good enough?

We really like the unit but can still walk away, we have to discuss with our family first this weekend...In the mean time, would love to know what you guys think? Should we renegotiate? or accept their ultimatum?

BTW, the size of the unit (this is for a cafe/restaurant) is 805 ft² or 75 m². The asking price is £15 per ft² which amounts to £12,075 + VAT per annum. The property is finished to a developer's shell only so we will have to undertake our own fit-out works including plastering, flooring, WC's etc but there's already a water and electricity supply.

Thanks .

 

[Simon-M]

If you are not happy with the deal. Run...don't walk. You both need to be happy not just him. So if it's not right for you it's not right. Don't leave yourself in a position to feel bitter about it later on when the prices start going up. Also, 10 years is a bloody long time. Are you sure!!!!!

 

[Talay]

Your rent is going up £20 a week for 5 years and will be 50% more than the initial rent in 5 years time. Does that bother you ?

You are within touching distance early on in the lease but you are miles apart in percentage terms later on and getting further away from the offer you made as the years go on.

Cutting through the waffle, if you think the starting rent is cheap, then you are probably fine with the increases as it will revert to what you thought reasonable over time. However, if you think the starting rent is fully priced, then I suspect you may resent the increases heading your way in terms of 12.5%, 11.1%, 10%, 9.1% rent increases over the 2nd to 5th years.

Over 5 years, the the landlord is asking for an extra £7k or so but giving you back £2k in additional free rent so essentially it is £5k more than you wanted over 5 years, which brings us back to the £20 a week extra every week.

 

[Big Pete]

10 years way to long.. and rents way to high tell them are they blind there is the biggest depression EVER about to come soon ..

YOU call the shots NOT them ..

 

[qul]

landlords will normally negotiate unless they have a better offer somewhere else or if they're unleveraged and can afford to leave it empty - final doesn't always mean final. also, I can't see any harm in going back to them with your latest offer?

6 months deposit seems too long, try asking for 3.

do you know how much the service charges will be, exterior repairs could be expensive, eg roof repair or other damage/wear&tear not covered by insurance. also, if landlord/agent is repairing and billing via service charge it may not give you control over when the repairs will occur, and they'll probably do it more expensively than if you got your own contractors in, because they're not spending their own money. you may also wish to get a survey done to check the condition of the property.

 

[BusinessDeli]

If you are not happy with the deal. Run...don't walk. You both need to be happy not just him. So if it's not right for you it's not right. Don't leave yourself in a position to feel bitter about it later on when the prices start going up. Also, 10 years is a bloody long time. Are you sure!!!!!

+1

Without a doubt.

How long has the unit been available?

 

[seasider]

Putting costs aside, I would be looking for more break clauses myself. Two breaks at 3 and 6 years would be much better than one at 5.

 

[regina]

Your rent is going up £20 a week for 5 years and will be 50% more than the initial rent in 5 years time. Does that bother you ?

You are within touching distance early on in the lease but you are miles apart in percentage terms later on and getting further away from the offer you made as the years go on.

Cutting through the waffle, if you think the starting rent is cheap, then you are probably fine with the increases as it will revert to what you thought reasonable over time. However, if you think the starting rent is fully priced, then I suspect you may resent the increases heading your way in terms of 12.5%, 11.1%, 10%, 9.1% rent increases over the 2nd to 5th years.

Over 5 years, the the landlord is asking for an extra £7k or so but giving you back £2k in additional free rent so essentially it is £5k more than you wanted over 5 years, which brings us back to the £20 a week extra every week.

We were offered the conventional rent at £10,008 per annum so total in 5 years is £50,040 which is the almost the same as the stepped rent's total (£50,000). We thought it's better to go for the stepped rent as we will have a low rent for the first 2-3 years and it will help with the cash flow.

 

[BusinessDeli]

This isn't sounding like an amazing or even reduced rate deal to me!

 

[regina]

This isn't sounding like an amazing or even reduced rate deal to me!

Asking price is £12,075 + VAT per annum, you still don't think his final offer is a good deal? It's around 17% discount...

 

[regina]

landlords will normally negotiate unless they have a better offer somewhere else or if they're unleveraged and can afford to leave it empty - final doesn't always mean final. also, I can't see any harm in going back to them with your latest offer?

6 months deposit seems too long, try asking for 3.

do you know how much the service charges will be, exterior repairs could be expensive, eg roof repair or other damage/wear&tear not covered by insurance. also, if landlord/agent is repairing and billing via service charge it may not give you control over when the repairs will occur, and they'll probably do it more expensively than if you got your own contractors in, because they're not spending their own money. you may also wish to get a survey done to check the condition of the property.

Yes, I asked for 3 months deposit only but they said they would need more information from us to consider this.

I was advised by our solicitor that he will put a cap on the service charge, say 25% of the rent and the FRI lease will be subject to a schedule of photographic condition.

 

No one asked where the shop is or the footfall.

I mean there is a tad difference between a prime site on Oxford Street and one down the Old Kent Road.?

 

[arcon5]

The rent is the last of your worries if the roof caves in or the walls need structural work doing. The repairs will cost you in addition to potentially lost business.

If signing a FR&I lease then includes terms which limit your exposure and place an obligation to have the repairs done at a reasonable value or for you to have works carried out.

Regarding the deposit, if it's a restaurant/cafe I assume you will be spending a lot of money on a) equipment/machinery b) fixtures and fittings and c) bringing the property up to a standard much less than it is now..... These give a lot of value to the LL alone. And the equipment can be collateral if you fall behind with rent which in a way cushions somewhat some of the risk the LL is taking.

Personally I would also seek to simplify the rent structure and give a greater ret free period in he first year... This is really when you will need it

 

[BusinessDeli]

Asking price is £12,075 + VAT per annum, you still don't think his final offer is a good deal? It's around 17% discount...

Well as has subsequently been mentioned we don;t know what the local units are going for but who's to say he didn't beef up the asking price in the first place? The 17% 'discount' would be so good then would it but it does give you the impression its good.

My tuppenceworth - Be Sure.

 

[regina]

The rent is the last of your worries if the roof caves in or the walls need structural work doing. The repairs will cost you in addition to potentially lost business.

It's newly built on the ground floor of a block of apartments.

 

[Chris Ashdown]

I would be more conserned about the fitting out costs as its just a empty site and no knowledge of the footfall

Some cafe make a living some dont last long, remember if you pack up after six months you still have 4.5 years rent to pay for plus possible rent depending if the law changes etc

Might be much better to buy an exsisting cafe and update it rather than spend a small fortune in building toilets, ceilings, walls and floors.

How many tables can you place in that size unit after all the mods, will it make it to small

Many landlords of commercial buildings are insurance companies who dont want to lower their rates with downturns and prefer to hang out for what they think is worth and what it shows on their books 2-3 years is nothing to them for it to be empty

 

[Talay]

It's newly built on the ground floor of a block of apartments.

Then a critical thing you need to know is whether these apartments are all sold and if so, are they finished units or shell ? If rentals, are they rented ?

In a prestigious development I bought in, with only 3 retail units, one sat empty for over 2 years. This was in direct contradiction to a massively oversubscribed High Street only moments away but the rent being asked was just too high and the terms far too onerous.

I was later on the management board.