RICS "COMMERCIAL TERMS OF LEASE AGREED PRIOR TO LEGALS"

A reminder issued by the Royal Institute Chartered Surveyors has been included on the latest news from Fairhurst Estates – “What a surveyor can tell you that a lawyer can’t.”

The commercial terms of a lease are agreed prior to legal instruction; the Chartered Surveyors team at Fairhurst Estates are members of the Royal Institution of Chartered Surveyors and refer to an article published by the RICS:

A lawyer will agree a lease for you but by the time your lawyer is engaged, the commercial terms of your deal have already been agreed. Therefore, there is limited opportunity for your lawyer to improve your deal and negotiate significant cost savings. Employing the services of a chartered surveyor to help negotiate your ‘heads of terms’ will save your business money, now and in the future.

Key negotiation points where a surveyor can help generate value include:

Rent

Chartered surveyors specialise in rent negotiations. They also analyse all market deals. This arms surveyors with accurate, up to the minute market intelligence to ensure the advice they provide, secures you the best possible terms.

Full Repairing and Insuring (FRI) lease terms

Most standard leases use FRI lease terms. Chartered surveyors understand the liability to the tenant of such terms and together with the technical knowledge of buildings, they will be able to identify opportunities to reduce your exposure to significant repair and maintenance costs when moving in, in occupation and on exiting your lease.

Incentive packages

Chartered surveyors have expert knowledge of the financial incentives being secured in the market. This information, together with an unrivalled knowledge of landlords, means they can identify opportunities to secure creative packages to meet specific occupier needs.

Lease structure

Chartered surveyors know the current trends in the market and can manage expectations on length of lease and lease flexibility, rent reviews, penalty clauses and options to extend. This knowledge will allow the surveyor to agree the most appropriate structure for your business.

Strategy

Surveyors know that to secure the best possible terms, you need to strategize your approach. Given the demands and pressures of your day to day job, do you have the time to create competition between two or three suitable options and negotiate the best possible lease for your business? Employing a chartered surveyor to acquire premises on your behalf will deliver this result for you.

Employing a chartered surveyor saves your business money every day.

Here is a recent example of two businesses acquiring a similar amount of office space one month apart within the same building in Edinburgh. One (Occupier A) was represented by a firm of chartered surveyors. The other (Occupier B) negotiated their lease on their own.

With advice Occupier A was able to negotiate a significantly better package. This involved the following immediate savings for Occupier A over Occupier B:

• Rent saving 10%
• Incentive package: 33% greater

Beyond the obvious immediate savings Occupier A was also able to dilute some of their exposure to significant capital expenditure during their occupation and secured an incentive package structured to meet their own requirements.

For many chartered surveyors negotiating lease terms is a key part of the day job. While, for many occupiers this process is time consuming, distracting and challenging and an added task on top of the day job.

The results prove that it pays to employ a specialist to negotiate on your behalf and the RICS should be your first point of contact when considering moving premises.”

For expert advice contact john.thornley@fairhurst-estates.co.uk