how to make an offer if I want to rent a shop?

[bingyan2000]

Hi,everyone, this question might seem very weird and stupid.

My partner and I want to rent a shop in London. We are entirely new to the business. The estate wrote down the information of the shop as following:



Subject to contract, rental offers are invited in the
region £65,000 per annum exclusive of rates, service
charge, VAT (if applicable) and all other outgoings.

We are verbally advised by the local authority the
premises have been assessed for rating purposes
as follows:

RATES:

Rateable Value (2010) £43,500
Uniform Business Rate (2013/2014) 47.1p in the £
Rates Payable (2013/14) £21,358.50
Interested parties are advised to verify the above
with the local authority

And there is also a service charge. What is the difference between rateable value and the actual rent? if we want to make an offer to settle a deal, do we make it base on the rateable value or asking a lower rent?

Thank you very much indeed for your help if you could answer me these questions.

 

[deniser]

The business rates are payable to the Council and non negotiable as they are set by Central Government.

The rent is payable to the Landlord. This is negotiable.

So you would pay £65k to the landlord plus VAT on this figure if the landlord has elected waive the VAT exemption. And you would pay £25,380 in rates to the council - the rateable value is the "value" of the premises for rating purposes and the actual rate payable is the 47.1p in the pound so essentially a percentage of the rateable value.

Service charge is payable on top and this is basically the cost of insurance, repairs and maintenance which varies.

For general guidance on making an offer see here http://www.squidoo.com/commercialleases

 

[BelindaChong]

Thanks to Deniser for the link. That was written in good plain English, and very understandable.

 

[antoine82]

Deniser made a pretty good description.

As for the rent negociation, it all depends on the shop. Has it been on the market for a long time? If you sign for a longer lease, you might get a better rent (you need to loo at the stamp duty land tax though).
But if they ask for around £65k, it means that they already know that they'll get lower offer and might accept it. It does not cost anything to propose £55k and see what counter offer they can make.

ALso, you need to look into these points:

- rent free period. It is not rare to get on average 3 months. See how many months you can negociate. If it is a highly sought property, you might get nothing. If the shop has been empty for a year, you might get a year. But in London, 3 months is usually the norm.

- deposit: how many months? If you are a newly formed company, it would not be unusual to be asked 6 months for the deposit. For an established company, 3 months.

- type of lease. Inside or outside the 1954 act. Basically it means that if you are within the act, you have a rigth to renew your lease at the end (it's a bit more subtle than that but that's the spirit!). Usually in London, the good property are always outside the act.

- lenght of lease. 3 years/ 5 years / 10 years/ 15 years.

- break up clause. DO you want a break up clause? Should it be mutual? AFter what time?

- rent review. FOr long leases you usually get rent review every 5 years. Although most of the time, it is only upwards ;-)

- lease assigment: if you sign for a long lease, you might at any point assign your lease to another company (it might be a good opportunity to get a premium) so make sure the initial lease makes it possible under decent conditions.

And last but not least, here are the 2 most important things you should remember before signing your lease:
- everything is negociable
- don't do this alone. Get a solicitor. It might cost you a few thousands pounds according to the complexity of the lease but it is definitly worth it.

Good luck and let us know how it goes!!!

 

[businessfunding]

When negotiating, remember to put together the variables & consider what is important to you.

Variables might include:

- rent
- Deposit
- Guarantees
- Payment holiday
- Break clauses
- Fit - out / refurb

I'm sure there are others.

Don't price-haggle, negotiate!

 

[bingyan2000]

The business rates are payable to the Council and non negotiable as they are set by Central Government.

The rent is payable to the Landlord. This is negotiable.

So you would pay £65k to the landlord plus VAT on this figure if the landlord has elected waive the VAT exemption. And you would pay £25,380 in rates to the council - the rateable value is the "value" of the premises for rating purposes and the actual rate payable is the 47.1p in the pound so essentially a percentage of the rateable value.

Service charge is payable on top and this is basically the cost of insurance, repairs and maintenance which varies.

that explained a lot. thanks!