Property is your business's second largest expense. Could you be overpaying?

How do I avoid overpaying when my lease expires?

Most businesses wait to see what action the landlord takes as a lease expiry approaches. But you should be proactive at this time and take advice for several reasons.

For budgeting purposes, you’ll need rental valuation advice so you know what you’re likely to be paying if you decide to renew your lease.

If the rent is going to increase prohibitively, you then have time to consider your options and potentially start looking for alternative, more affordable premises, in good time.

If your current rent is in excess of the market rent, landlords often decide to do nothing in the hope that a tenant will continue in occupation - paying the higher rent on a holding over basis. In these circumstances, you should take the proactive step of serving a notice that terminates your existing agreement and requests a new lease at the reduced market rent.

This notice needs to be served at least six months before the lease expiry date for the reduction to be effective as soon as possible, on the actual date the lease expires.

Valuation advice, therefore, needs to be taken around nine months before the expiry date so that an informed decision can be made and instructions given to a solicitor. A landlord is unlikely to volunteer to reduce the rent.

Taking advice early is therefore important whether the rent is going to increase, or go down.

My landlord has notified me of a rent review; what do I need to do?

You should always check the rent review clause in your lease to find out whether there are any mandatory timetable provisions for a response to the landlord’s notice.

If there are strict requirements and you fail to adhere to them, your landlord’s proposed rent can sometimes become the contracted new rent without any recourse. Always take advice from a surveyor, or solicitor, as soon as you receive a rent review notice.

In most commercial leases which contain a rent review, the rent is to be revised to the market rent making certain stated assumptions and disregards. A surveyor is best placed to advise on this and whether the rent review provisions contain any unusual or onerous clauses which might impact on value. For example, a restrictive user or alienation clause may mean that an end deduction should be made when valuing the property.

You don’t need to accept your landlord's valuation. Your own surveyor can negotiate on your behalf to arrive at the correct level using market comparables and taking into account the provisions of your particular lease.

There is a lot to consider – your landlord may tell you that your property is worth £X but you should take advice to make sure you agree to the correct rent.

Getting timely advice from someone who knows their way around a lease is the key to saving money.

I’ve just got my Service Charge bill – is it correct?

Getting a service charge bill can be confusing, particularly when costs have increased significantly from the previous year. Don’t assume that the amount demanded needs to be paid.

The starting point is always your lease. It determines which costs the landlord can recover, how your contribution is calculated and whether there are any exclusions.

Check whether the bill includes:

• Repairs and maintenance

• Cleaning, security and utilities

• Insurance

• Management or administration fees

• Major works

• Reserve or sinking-fund contributions

• You should also check the apportionment.

Your contribution may be based on a fixed percentage, floor area or another calculation. Even if the expenditure itself is legitimate, an incorrect apportionment could result in you paying too much.

It's also important to establish whether the demand is an estimate, actual expenditure or a reconciliation against previous payments.

If the bill has increased, ask the landlord or managing agent for supporting accounts and an explanation of significant rises.

If you're unsure whether the charges are recoverable, a commercial property surveyor can review the lease, expenditure and apportionment to establish whether the bill is correct.

Don't simply assume the bill is right or ignore it. Check your lease and any applicable deadlines before deciding how to respond.

I’ve got a break option in my lease coming up – should I stay or go?

A lease break - or a lease expiry – are opportunities to reassess your property requirements.

Start by considering what the premises are worth to your business. Is the location still right? Do you need more, or less space? Would relocating disrupt staff, customers or operations?

You should also compare the cost of staying with the cost of moving. A cheaper, new property may come with significant relocation, fit-out, legal and removal costs, as well as potential business disruption.

Your lease is equally important. Break clauses can contain strict conditions relating to rent, vacant possession and compliance with lease obligations. There will be a minimum notice period that has to be given. Missing a condition or serving notice incorrectly can potentially invalidate the break notice.

Before deciding, get a dilapidations survey. This can identify repairs, reinstatement and other works you may be liable for at the end of your lease - giving you an early indication of your potential exit costs and allowing time to address issues or negotiate with the landlord.

If you are considering staying, the break date may also provide valuable negotiating leverage on rent and lease terms. If you engage with your landlord early enough, you may be offered incentives if you agree to take out the break option.

A commercial property surveyor can assess the market rent, relocation costs and dilapidations exposure, helping you make an informed decision about whether to stay or go.

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