What are your obligations and rights as a tenant if your lease has an error?

What are your obligations and rights as a tenant if your lease has an error?


A commercial lease can be a complex document and it’s all too easy to overlook important details. We look at the kind of errors which crop up and why it’s so important to make sure a lease is correct before you sign.

Common errors

Signing a lease without examining it thoroughly first, assisted by your lawyer, can lead to some serious consequences for you. The most common errors in commercial leases include:

Neglecting to determine who is responsible for maintenance and repair The lease should set out clearly who has responsibility for maintaining and repairing the property. Most landlords will require that the tenant keeps the property in good order and, at the end of the lease, returns it in good repair. It is essential that this is defined explicitly in the lease in order to avoid either a large repair bill or a lengthy and expensive court case.

Not clarifying security of tenure

Commercial leases imply that a tenant can remain on the property and ask for a renewal of their lease, once the old one comes to an end, as stated in the Landlord and Tenant Act 1954. The landlord has limited grounds to object to this but can, in theory refuse to grant a new lease. Tenants must, therefore, examine the lease carefully to see if security of tenure is included in the lease or not. If a landlord wishes to remove the tenant at the end of the lease, this must be explicit in the terms of the lease, and a formal process must be gone through.

Failure to insert a rent review clause

If a landlord does not include a rent review clause into a lease they will be unable to raise the rent to cover an increase in inflation and other costs. While this may benefit the tenant rather than the landlord, legal issues may arise if the omission is discovered at a later date.

Omission of a forfeiture clause

If a tenant fails to pay the rent or breaches other obligations within the lease, the landlord can evict them, without having to apply for a court order. However, without this clause being written into the lease, it could prove difficult and expensive to remove the tenant through the legal system.

Lack of protection against legal fees liability

Landlords can specify that their tenants must pay any legal fees incurred during variations to the lease, if they wish to avoid paying them themselves. Landlords may also ask that the tenant pays bailiff’s fees if an eviction is required (due, for example, to non-payment of rent). These instances are just some of the most common mistakes that tenants find in poorly-prepared commercial leases. There are numerous others too. It is for this reason that it is essential that you have a lease checked by a suitably-qualified commercial lawyer who can not only advise you of errors but also of omissions which may act in the landlord’s favour, rather than yours. Legal advice may be relatively expensive at lease stage, but the amount you’ll pay is a drop in the ocean compared to legal action later.

Eddisons can offer you advice on all aspects of commercial leases, with legal specialists who understand the intricacies involved in such complex documents. If you need guidance on what’s in your lease and maybe, more importantly, what’s been left out, talk to one of our team.


Written by: Steven Jones on Thursday 23/06/2016


How would a Brexit affect the commercial property market?

How would a Brexit affect the commercial property market?


On 23 June 2016 British citizens are being asked to cast their vote to decide if the UK should remain in the EU or not. We look at how, and if, a Brexit would affect the commercial property market.

The background

Before a single vote has been cast, the shadow of the EU referendum has fallen over the UK economy in the form of uncertainty. While GDP has increased by 0.4% between Q2 2015 and Q1 2016, continuing the run of 13 consecutive quarters of positive growth since Q1 2013, the British Chambers of Commerce has suggested that the UK economy has softened in the first quarter of the year. The Bank of England also notes that while consumer spending remains resilient, annual rates of activity growth have slowed, reflecting both shrinking world growth and an increase in unease.

Analysts on both sides of the debate are producing statistics which they claim enhance their arguments. The London School of Economics and the Centre for Economic Performance are predicting that UK GDP will fall by up to 3.1% if the UK decides to leave, while other economists are forecasting a rise in GDP of 10%. While nothing in this debate is certain, we now look at how both scenarios might affect commercial property in the UK.

The case to remain

Before the Scottish referendum on independence in 2014, there was a 10% fall in property sales in the eighteen months running up to the vote. However, after the result, the market caught up. The organisation expects commercial property investors to behave in a similar manner in the EU referendum, and delay any decisions until after the vote has been cast.

It seems that this scenario has already begun, with commercial property in London being affected by this uncertainty. Several commercial property fund managers have changed their pricing basis which has, in effect, cut values by between 5 – 6%. It has been noted that investors are unwilling to commit to, for example, long term construction projects given the prevailing atmosphere of uncertainty which may affect tenant demand, post-Brexit.

The IMF and the Treasury have also warned that house prices could fall dramatically. The National Association of Estate Agents has put this figure at £2,300 outside London and £7,500 in London. And while this might seem to be a blessing for first time buyers, the Association of Residential Letting Agents has warned that because of the reduced amount of demand for housing (due to fewer people immigrating from the EU) landlords could be forced to cut rents or sell up altogether having found the situation financially unviable.

However, it’s feared that it is in London’s commercial property sector that the worst of the Brexit effect would be felt. Experts argue that many EU companies, particularly investment banks, would move to the continent, vastly increasing the rates of vacancies within offices. Some warn that rental growth could also be negatively impacted by a slowdown in GDP and the uncertainty surrounding any future trade negotiations.

The case to leave

With just over three weeks to go, the polls are as close as they can be – The Economist’s latest Brexit poll tracker shows that 40% want to remain, but the leave campaign has almost as much support, with 39% of people wanting out. Many of the Brexit arguments are founded on the amount of money the UK contributes to the EU – some say as much as £350 million every week – and the unaccountability of EU officials – none of whom are elected here.

HIS Global, a company providing decision-making support for business and governments through information and analysis, has put forward a view that a Brexit would have a long-term positive impact on the UK, in terms of economic consequences, as well as a more homogeneous and clearer EU. Leave campaigners also point out that in the wake of a Brexit, the UK would be able to develop new trade agreements with not only Europe but also developing countries in the world, with whom we currently do not deal.

Those in favour of a Brexit are sceptical of the forecasts of economic doom and gloom were the UK to leave the EU. They claim that Brexit could have a positive impact on job creation and growth, leading to a surge in the economy. Any short-term impacts, they argue, would be outweighed in the long-term by a short period of adjustment in, for example, the UK’s inflation rate and the cost of borrowing, which is most likely to affect those interested in the commercial property market, and that this period of adjustment would last for a matter of months, rather than years, as implied by those who are in favour of remaining.

The result

Amidst claims and counter-claims, polls, opinions and forecasts, the truth is that none of us can know how the commercial property market, as well as the wider economy, will be affected by a vote to leave. As we gaze into our crystal ball, the mist will not clear until after the result has been announced and, as we vote on 23 June, we need to take a balanced and impartial view of the facts and make an informed choice on an issue which will impact all our lives for many years to come.



Written by: Steven Jones on Wednesday 01/06/2016


Understanding capital allowances for businesses purchasing commercial property

Understanding capital allowances for businesses purchasing commercial property


In April 2014 the government introduced new rules about claiming capital allowances on commercial property purchases. We take a look at them and ask what you can do to maximise your tax relief.

What are capital allowances?

Capital allowances are deductions you can make to business assets which allow you to deduct their value from your profits before you pay tax. Capital allowances apply to plant and machinery, such as equipment and business vehicles, which you buy as part of a commercial business transaction and which are integral to its effective functioning. By claiming capital allowances, you are able to take advantage of tax relief on the items’ depreciation over a number of years, effectively writing them off eventually.

The 2014 legislation

The new rules were designed to help improve cash flow for businesses, to make the process more transparent and to avoid tax relief being claimed multiple times on the same asset. But claiming capital allowances is a complex issue and often depends on both vendor and purchaser properly understanding the rules.

Capital allowances have to be specifically claimed in order to reduce taxable profits and quite often they are not. This may be because the process is seen as too complicated, few records are kept, or that the results yield little value to the business owner. Sometimes the potential claimant simply doesn’t know that they are entitled to claim, and in other instances their tax advisors have not informed them.

Put simply, if a vendor is selling a commercial property which includes plant and machinery and has not previously claimed for plant and machinery capital allowances, the purchaser will not be entitled to claim tax deductions in the future either.

What you must ask

If you’re looking to purchase a commercial property and intend to claim capital allowances, it is vital that you establish the status of the seller – whether they have claimed in the past so that you are able to do so in the future. During the due diligence phase of your purchase you should ask to see the vendor’s tax records and notes regarding their expenditure while they have owned the property.

In some circumstances, it is still possible, during the purchase process, for the vendor to submit a tax allowances claim, and, if they wish to negotiate the best possible price for their property, they will see the importance of co-operation in this matter. As a potential purchaser of a commercial property without adequate capital allowances having been claimed, you are in a strong position to request a relevant amount be deducted from the sale price as compensation for future tax losses. The onus is firmly on the vendor to put their tax affairs in order so as to not negatively impact on future owners of the business.

If you’re considering purchasing a commercial property and are unsure of the tax status of the vendor, or have other issues regarding commercial property purchasing which you need assistance with, speak to one of the Eddisons’ team. Our advisors can offer up-to-date, professional and confidential advice about all aspects of the process.


Written by: Steven Jones on Friday 27/05/2016



What is a probate valuation and why do I need it?

What is a probate valuation and why do I need it?


As of 1st June 2016, all business and commercial valuations will be serviced under the trading name of Eddisons Taylors.

The Government’s recent changes to the inheritance tax thresholds have highlighted the importance of having an accurate valuation for probate. We take a look at the issue of probate valuations and explain why accuracy is so important.

What is a probate valuation?

Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.” And while we can’t be certain what happens in the afterlife, we can try to minimise the amount the government takes from our descendents after we pass away.

Probate is the legal process of dealing with someone’s assets after they die – this is usually conducted by the executors who carry out the wishes of the deceased person, as stipulated in the will. A Grant of Representation allows the executor to gain access to all the information they need to establish the value of the deceased’s assets. These can include money in bank accounts, stocks and shares, vehicles, jewellery, works of art, and probably the largest asset anyone will hold, property.

A probate valuation takes into account all these items and deducts any outstanding debts to calculate how much inheritance tax (IHT) is owed. Currently, assets totalling up to £325,000 are classed as being in the nil rate band for IHT. Assets above that figure are taxed at 40 per cent.

In some instances, up to 100 per cent of IHT can be mitigated on business assets when they are transferred. However, this is an extremely complex area and excludes, for example, land, buildings and machinery unless owned by a trust whose beneficiary has a life interest in such a trust. Specialist advice must be sought in such instances.

Why it is so important

Probate, inheritance tax and capital gains are inextricably bound up with each other, particularly in respect to commercial property, which with a total value of £787 billion represents 13 percent of the total value of buildings in the UK – a figure which the Chancellor of the Exchequer would like a large slice of.

Establishing the accurate value of an estate is essential if IHT is to be minimised and it’s vital that you seek independent, professional advice about what any commercial property which makes up an estate is valued at. The Inland Revenue is particularly vigilant about valuations which fall significantly below or above market value and will instigate investigations to recoup any money and possibly stipulate higher tax liabilities if potential fraud is suspected.

A valuation by an estate agent, for example, is not sufficient for the purposes of probate, therefore, all valuations must be carried out by a qualified and experienced RICS surveyor who has knowledge of the local market and the authority to provide a compliant report. It’s vital that the executor of the will understands these legal and financial obligations and acts in accordance with the law.

If you need any assistance with the process of probate, including a valuation on a commercial property, or advice on being an executor, contact the Eddisons team. Our experienced and highly-trained staff includes RICS surveyors who can offer you up-to-date advice on valuations as well as other matters relating to commercial property.


Written by: David Cran on Thursday 26/05/2016


What is my business worth? How to value a business

What is my business worth? How to value a business


As of 1st June 2016, all business and commercial valuations will be serviced under the trading name of Eddisons Taylors.

There are many reasons why you might choose to value your business. These include if you’re thinking of selling it, need to raise finance, are planning an exit strategy, for insurance purposes or to ensure efficient tax planning. We look at how you can value your business and why it’s so important to get it right.

Although there is no precise formula to business valuation, there are a number of methods which can be used to assess how much your business is worth.

Profit Multiples

If yours is an established business which has a profitable track record, this method may be suitable for you. If you exclude factors such as one-off purchases and costs, your average annual profits can be ‘normalised’. This figure can then be multiplied by anything between three and ten times, depending on the size of your business, to determine the Price/Earnings (PE) Ratio. So, for example, the PE ratio on a business making a post-tax profit of £100,000, which was up for sale for £500,000, would be 5 – giving a sale price within reasonable expectations of future profits.

Asset Valuation

If, for example, you are a property developer with a portfolio of assets, this may be the best method for you to use to value your business. The net value of your assets at the current value will be added together (and liabilities deducted) to arrive at a figure which can be used as a valuation price.

Entry valuation

For businesses which are more customer-facing, entry valuation, which calculates how much it would cost to set up a similar business, may be the best method for you. Issues to consider are the cost of sourcing and renting or purchasing premises, recruitment and training of staff, developing a product or service and purchasing the necessary assets to build a customer base and establish a reputation.

Discounted Cash Flow

This method may be most appropriate for established businesses which have had considerable investment but have few assets, and can forecast a predictable cashflow into the future. Estimates of future cashflow are made, possibly up to 15 years ahead, and the ‘terminal value’ of your company will also be calculated. These sums are then discounted by between 15 – 25% to take inflation variations into account to arrive at a valuation figure.

Rule of Thumb

The rule of thumb is applicable to businesses which may change hands regularly, such as retail outlets or recruitment agencies. Each industry will have its own rule of thumb but in general a value is arrived at by looking at factors such as multiple of turnover or footfall per retail outlet.

Of course, valuing a business is a delicate and exacting art, and must take into consideration a range of factors including the current and future state of the economy, for example, in order for you to obtain the best possible price. While you may feel that you can capably do it yourself, most business owners prefer to rely on the expertise of business surveyors and valuers who can offer an independent, comprehensive and objective report backed by up-to-the-minute financial information and industry forecasts.

If you’re looking for any further information about valuing your business, talk to a member of the Eddisons team. Our advisors can offer you impartial and professional advice about all aspects of business valuation, amongst many other things.


Written by: David Cran on Wednesday 25/05/2016


How landlords can protect their rights in five simple steps

How landlords can protect their rights in five simple steps


Landlords have many responsibilities, some of which can seem onerous at times. However, these are balanced by the rights which you have, all of which are designed to look after your interests in respect of commercial properties. We look at five simple steps you can take to protect your rights.

1) You have the right of forfeiture

If your tenant does not pay their rent for a specified period (usually between 14 – 28 days) you have the right to terminate the lease – this is known as forfeiture. Unlike residential landlords, you do not need to apply for a court order to terminate the lease and repossess your property.

Of course, it is reasonable for a tenant in financial difficulties to ask for a period of reduced rent, and you may consider that a viable option, as opposed to having business premises vacant. Therefore, it’s important to always keep the avenues of communication open between you and your tenant.

2) You have to right to ask for rent if the tenant breaks the lease early

If a tenant’s business suffers a bad patch and goes into administration, they may seek to vacate the premises or sublet it to another tenant. However, this should not impact on you – the tenant (unless there is an express term in the lease) is still responsible for paying the rent as well as other legal and financial responsibilities until the lease expires, whether they have vacated the premises or not.

3) You have the right to ensure your property is maintained

Whatever the current state of your commercial property, you have the right to legally oblige your tenant to restore it to good order after their lease ends. Negotiations at pre-signing stage can include the obligation for the tenant to restore the property to its original condition but you should ask your solicitor to prepare the lease to include favourable Schedule of Condition terms which mean that the tenant is as least partly, if not wholly responsible, for any repairs to the property before they vacate.

4) You have the right to add a service charge to the rent

If you incur expenses maintaining common areas in a property, such as lighting, refuse collection and security, you have the right to charge your tenants for the cost of their upkeep. RICS offer guidance documents which can assist in setting fair and transparent charges so that tenants benefit from the services provided and landlords are not out of pocket.

5) You have the right to expect the tenant to insure the property

Insurance on a commercial property should not only include covering any damage which may unfortunately happen, it should also cover any rental income losses you will incur as a result of such damage. This is the responsibility of the tenant and should be agreed in the lease as one of the conditions.
If you have any queries about the rights you have as a commercial landlord you should seek professional advice. The Eddisons team can offer you professional advice and information about all aspects of preparing a lease or overseeing your properties.


Written by: David Rowling on Tuesday 24/05/2016


UK Commercial Property Rent Values Continue Upward Trend

UK Commercial Property Rent Values Continue Upward Trend


UK commercial property assets of all varieties increased their rental values by 1.4 per cent on a collective basis during the first three months of 2016.

That’s according to the latest figures on the subject, which show that rent levels associated with commercial properties throughout the country are currently on an upward curve.

Indeed, at a quarterly growth rate of 1.4 per cent, the rent value increase in Q1 2016 matches the same figure for the final three months of last year – which was the highest growth rate recorded since 2007.

The figures cover all forms of commercial property whether they are used as offices, retail spaces, warehouses or industrial premises of any kind.

Of these sectors, commercial properties categorised as being prime industrial real estate recorded the strongest rent value growth in the first quarter of this year.

At a rent value growth rate of 2 per cent, prime industrial properties across the UK reportedly managed the third sharpest increase recorded during any three month period since as long ago as 2001, according to the latest data.

Meanwhile, the values associated with office space in London continued on a relatively sharp upward curve and increased by 2.6 per cent on average as compared with the last three months of 2015.

The average cost associated with renting prime office space in the City of London jumped by 4.6 per cent in the quarter and the Docklands areas that include Canary Wharf saw average prime rental increases of 5.4 per cent in the period.

Other areas which saw notably strong commercial property rent value increases in the first quarter of this year included the West Midlands, where plans for the High Speed 2 (HS2) rail link are understood to have prompted an increase in investor interest and buyer activity among landlords.

The BBC recently reported that the main offices of the organisation tasked with planning and delivering the HS2 project are soon set to be relocated from London to Birmingham.

HS2 Ltd is expected to employ close to 1,000 people from its offices in Birmingham while retaining smaller teams in the capital.


Written by: Steven Jones on Tuesday 17/05/2016


How can businesses maximise the sale of their assets?

How can businesses maximise the sale of their assets?


If you’ve invested in commercial property, the time might come one day when you need or want to sell your premises. We look at how you can maximise the sale of your physical assets.

Despite a slight reduction in the returns that can be made on commercial property, down to around 8.8% this year, from 2015’s high of 13.4%, it is still one of the most lucrative asset classes to invest in. Astute investors can maximise the return on their properties through some simple strategies before they sell.

Review the rent

To facilitate a smooth sale, particularly where there are sitting tenants, ensure that any upcoming rent reviews have been negotiated and settled to give the buyer a clear indication of the amount of rent he or she can expect from their purchase.

Maintain your asset

The better condition your property is in, the more profit you will make from the sale. It’s a simple concept. Unless you’re prepared to take a financial hit and accept a lower offer, make sure that the property is in good condition – the roof is intact, the doors and windows are modern, energy-efficient and secure, the services, such as gas and electricity, are in good order and have been professionally certified. If a property is vacant, ensure it is clean and clear of the last tenant’s accumulated debris. If you have a tenant in place, ask them to tidy and clean (if necessary) prior to viewings.

Time it right

Of course, any savvy investor will want to sell at the height of the market to maximise profit, but in these days of uncertainty, and a stalling market the timing of your sale is vital. Of course, if you are in a situation where you have no option but to sell, you’ll have to accept that you may not realise the best price possible. However, if you can hold onto your property until the market picks up, you’ll be in a better position to reap greater rewards. Also bear in mind that commercial transactions can take a considerable amount of time so the market may have changed considerably from the time you send your property to market to the time you eventually sell.

Consider a change of use application

A property’s value is based on what potential the buyer can see in it. So if you can offer a purchaser a wider range of options they will be more prepared to buy at the right price. Your local planning office will be able to offer advice as to whether a change of use application will be looked upon favourably.

Prepare a search pack

Being proactive in your approach to selling will stand you in good stead to make a quick and profitable sale. While it’s usually the buyer’s responsibility to undertake searches, shrewd sellers can put together an information pack which, although it will cost money, will recoup more than the outlay in the end.

If you need any advice or information about selling a commercial property asset, contact the Eddisons team. Our qualified and experienced professional advisors can offer you expert guidance to ensure that your property is sold efficiently and effectively.


Written by: Steven Jones on Thursday 28/04/2016


How to add value to your commercial property

How to add value to your commercial property


Commercial property is often seen as a long-term investment with incremental year-on-year gains. However, there are some ways that you can increase the value of your commercial investment – we take a look at the simplest methods of doing so which won’t cost you a fortune.

Improve it

If you’re the owner of an industrial property, this may be easier said than done. However, whether you own a warehouse, retail outlet or residential property, you can add instant perceived value by maintaining the perimeter, ensuring the façade is neat and tidy and the car park, if appropriate, is well-delineated as well as keeping the area litter-free. Any garden areas need to be regularly maintained, the grass cut and the weeds dug out.

Retail and office spaces will benefit from modern, secure, energy-reducing windows and doors which will not only let in more light and reduce noise but also demonstrate that you’ve invested in your property.

If the interior of your property is looking a little dated, get it professionally decorated in neutral shades. This is a sure fire way of attracting the right attention from quality tenants – they can either simply occupy the property and start trading or can stamp their own individual touches on it.

Also consider the utilitarian areas of a property – kitchens and bathrooms in particular. If you wouldn’t want to use the facilities why should your tenants?

Increase its size

If you can extend your property to increase its size, you can either get more tenants in or charge more rent. You will need to seek relevant planning permission before you alter your building.

If you can’t extend, think about maximising the rentable square footage. A qualified surveyor may be able to help you re-evaluate the space and add to the area that you can charge rent on – for example, a large but under-utilised reception area may be able to become a rentable room in an office block or an unused attic space could become an extra bedroom.

Put the rent up

Perhaps the simplest and most cost-effective course of action is to raise the rent. However this has to be tempered with the knowledge that if you raise the rent too much, your tenants may leave and you may have a vacant property on your hands which will generate no income whatsoever. Do your market research carefully and evaluate what the ceiling is for similar properties in your area. If you find you are charging too little, write a clause into the rental agreement at renewal time that the rent will increase in line with market values. This will be especially relevant if you’ve recently made improvements to the property.

Request a business rates re-evaluation

If you’re paying a substantial amount of business rates ask your local assessor to re-evaluate your property. It could be that the current rateable value is based on an assessment which was done at the height of the property boom and could be reduced, saving you money.

If you need advice or information on any aspect of commercial property ownership, leases or valuations, contact the Eddisons team. Our experienced and professional staff can offer you confidential advice on your commercial property portfolio.


Written by: Steven Jones on Wednesday 27/04/2016


Lease Accounting Rule Changes Tipped to Bring $3bn onto Company Balance Sheets Worldwide

Lease Accounting Rule Changes Tipped to Bring $3bn onto Company Balance Sheets Worldwide


As much as $3 billion could soon be added to the balance sheets of companies around the world as a result of changes to international accounting rules.

The International Accounting Standards Board (IASB) is in the process of overhauling its rules relating to leasing commitments, including those linked to commercial property, and the result looks set to be some very significant additions to the balance sheets of thousands of businesses.

Having recently published a new set of International Financial Reporting Standards (IFRS) in relation to leasing deals of all kinds, the IASB has explained that its aim is to improve transparency in these contexts in more than 100 countries worldwide.

Until now, rental deals and other leasing liabilities have not needed to feature on company balance sheets but that is set to change and the figures that are to be newly-disclosed look likely to be very large indeed in many cases in the UK, across Europe and on a global basis.

“These new accounting requirements bring lease accounting into the 21st century, ending the guesswork involved when calculating a company’s often-substantial lease obligations,” said Hans Hoogervorst, the IASB’s chairman in a statement.

“The new standard will provide much-needed transparency on companies’ lease assets and liabilities, meaning that off balance sheet lease financing is no longer lurking in the shadows. It will also improve comparability between companies that lease and those that borrow to buy.”

It’s understood that retailing companies, who often lease premises on a considerable scale as a routine part of their operations, could be among those most acutely impacted by the ongoing regulatory overhaul.

The changes aren’t expected to directly impact the cash flows of any companies regardless of the scale of their relevant liabilities but companies are nonetheless being encouraged to understand more about their own position with respect to large-scale leasing deals of all kinds.

“There is much work for companies to do to understand and implement the changes, not least in the area of data collection, and this work should be started sooner rather than later,” said Nigel Sleigh-Johnson from the Institute of Chartered Accountants in England and Wales (ICAEW).


Written by: Paul Gagan on Tuesday 19/04/2016