As a commercial landlord ensuring that your position, building and income are secure will be a primary concern. In terms of investment and ongoing relations with your tenants, the key to security is all in the groundwork. The facilities of your building and the terms that you agree to your lease contract must both be planned and considered with professional advice and the future in mind.
It is expected for a landlord to agree on a separate rent deposit deed with their tenant, which is independent of regular rental payments and should be held in a specific account distinct to the landlord’s own account. Holding a rent deposit of typically between three to six months rent provides security for the landlord should a tenant fall into rent arrears. It is therefore important to be clear in the deed that these funds are relating to rent only and not to be utilised for other purposes such as dilapidations or service charges. Many tenants would prefer to receive a proportion of the deposit back early, however, it is clearly preferable for a landlord to hold the deposit for the duration of the lease. To avoid dispute, it is important to consult with your commercial property manager to ensure that the agreement and its wording is clearly conveyed.
This measure has been on the rise since the 2008 financial crisis. As a limited company is a separate legal entity, directors and shareholders are not usually personally responsible for the liabilities of the company. Therefore a personal guarantee provides heightened security in a lease agreement. There can be reluctance on the part of a tenant to enter into a personal guarantee, however, with the advice of a commercial property professional, there can be scope for agreement. There may be areas for negotiation whereby a time limit is set to the guarantee, for example. So it is important to utilise experience and knowledge when entering into terms such as this to avoid disputes later down the line.
This aspect of security is more involved with the control of your building or space. The Landlord & Tenant Act 1954 allows the tenant the automatic right to remain in possession of leasehold business premises after the lease term reaches its natural end. If a landlord knows that at the end of a lease agreement they plan to occupy, redevelop, or change the use of the premises, then the lease should exclude the Landlord & Tenant Act 1954. Although many tenants would be resistant to this, there are those whose nature of business means that they are willing to accept this exclusion. In this situation, preferential rental rates can be offered to agree to lease terms which are mutually beneficial to both parties.
A responsibility which should sit both with the landlord and tenant. As a landlord, you may not suffer from the loss of a tenant’s property as a result of a break in, but damage to the building and damage to the relationship are very real implications to lapsed security. In this way, it is key for a landlord to provide strong physical security to the building. Whether this is up to date locking systems, CCTV, alarms or internal safeguarding, a commercial property manager can advise the best solutions for an individual property. Not only will your building be more secure, but it will also be more desirable for high-quality tenants.
Security is a wide-ranging topic which it is important to understand fully in order to optimise the benefits of your investment. Commercial property professionals have the experience to offer considered lease guidance and practical building advice which ensure that both your property and income are secure.
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