Maintenance Costs
The first and potentially biggest is the cost of maintaining the property. Doing this anywhere is a considerable business expense, but it’s felt all the more acutely in London. That’s partly because the cost of labour in London for construction work is typically higher than elsewhere in the country, making any maintenance work inherently costly. Secondly, despite the higher cost of maintenance work, due to the higher cost of rents, this is often much lower in comparison to the cost of rent than elsewhere. In turn, this means it is often worth keeping properties in London in better condition than elsewhere, leading to an overall increased maintenance requirement.
On the leading side, your lease should set out the condition that you need to keep the property in. If you’re leasing somewhere where rent is higher (like London), then you might find that enforcement of the lease is stricter, so you’ll need to spend more on upkeep over the course of your lease, or spend a big chunk at lease end.
However, if you’re buying the freehold of a London property, then the degree of maintenance you do on the building is in part at your discretion – as long as it suits your business purposes! But when you do maintain it, you will likely be subject to more expensive works.
Looking at an example, if you’re purchasing a commercial building in an attractive location in London, you may end up spending £5m, instead of £1m for the same property in a less desirable area or another part of the country. If the building needs a new roof that will cost £100,000, then the cost of the work relative to the value of the property is one–fiftieth, rather than 10% – or maybe a bit less if the cost of work elsewhere would be lower. So if you’re a commercial landlord with a property like this on your portfolio, you’ll be more likely to reroof earlier, rather than eking out the life of the roof through patch repairs, since it’s worth it to protect your investment.
Defects
When you’re buying or leasing a commercial property, it’s easy to see a watertight space ready to take your business setup. It’s also easy to miss items of disrepair. In fact, many of them might not even become apparent until later on, or during a detailed inspection by a specialist building surveyor. If you miss these defects before you buy or sign the lease, then this could end up costing you a huge amount more. By knowing about them, you can negotiate the lease terms of purchase price, saving yourself time, stress and money.
The alternative, of course, is to skip the survey. After all, you’re already paying £100K in rent a year – your landlord won’t expect you to complete repairs that were already needed at the start of the lease, right? Well, that’s where you’re wrong. Unfortunately, many businesses think that surveys an unnecessary cost, only to find that they have to pay out for significant and unexpected costs only a short time after taking on a commercial property. In some cases, this could be more than the annual rent! These unexpected costs can put a significant strain on a business’ cashflow and be a huge source of stress for business owners, which is why we always say the survey will be cheaper and less stressful in the long run!
Is There a Solution?
Of course! At Harrison Clarke we have a variety of different survey reports available for different property interests. Based on the examples above, if you’re looking to buy the freehold of a commercial property in London, we would recommend a Commercial building Survey. This survey covers the condition of the building, sets out the costs and approximate timings or repairs and upgrade work necessary, and considers statutory compliance and any legal or planning issues – all of which can help protect business owners from unexpected surprises.
If you’re on the leaseholder side, our Leaseholder Survey provides a detailed narrative on the condition, required repairs and their cost during the expected lease term. It also helps you to understand how the lease related to the bricks and mortar. On top of this, it provides some guidance on what to expect from your landlord in terms of a dilapidations claim at lease end, and will set out any steps you can take to mitigate your liabilities as much as possible.
So, if you’re a business owner looking to take on a new commercial space in London and want to explore your survey options, our team of expert building surveyors are the people to speak to. You can reach us on 020 8153 1233, and we will be happy to help find the most suitable solution and de-risk your property journey.
For more expert advice on surveying and property matters, check out our range of informative videos on our website or YouTube channel. Harrison Clarke Chartered Surveyors is here to guide you every step of the way!
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