Before leasing an office it is important that you budget for all of the costs involved. Here we discuss the most important costs that you need to consider.
1. Rental Costs
The rental on the office makes up the greatest cost of leasing an office. Usually, the rent is paid in advance on a quarterly basis on these dates: 25th March, 24th June, 29th September and 25th December. It is your responsibility as the tenant to pay on or before the due date to avoid late charges, as per the terms of the rent agreement.
You will need to provide three years of audited accounts to the landlord to demonstrate your capacity to pay the rent. Depending on the strength of your accounts (and if you don’t have three years of accounts to show) you might have to provide a rental deposit, which is usually in the form of a cash deposit in an escrow account. If however, your net profits for three years running are more than three times the annual rent, you usually wont have to pay any deposit. The landlord will have the right to withdraw money from this account in case you fail to pay rent or fulfill your lease obligations.
3. Professional Advice Expenditure
You should expect to pay at least 10% of the yearly rent if you hire an acquisition agent, a solicitor or surveyor in the process of finalising the lease.
4. Business Rates
The VOA, The Valuation Office Agency for England and Wales, periodically carries out valuations based on rental values. These are called business rates which are a form of council tax for business premises. Usually business rates are between 30 to 50% of the office rent.
5. Other Costs
- Local authority fees for services like parking and waste management
- Insurance costs
- Maintenance fees and repair charges
- Operation costs like electricity and heating or service charges for cleaning are included. It is advisable that you ask for an EPC (Energy Performance Certificate) copy for the commercial property you are about to lease. The landlord is legally bound to furnish the same except when you rent a serviced commercial space.
- Stamp Duty Land Tax (SDLT), payable on a majority of commercial property leases
- Deposit is the amount equivalent to either 3 or 6 months lease fee
- VAT Only for certain selected buildings, tenants need to pay VAT on rent and all service charges. If a company is VAT registered, it might be able to recover the same.
Hence, before you zero in on a commercial property, you must take into account all these costs so as to appropriately meet your budget plan requirements.
This article has been written by Jonny Peace of OfficeMan Limited – an online platform for sourcing suppliers for your office refurbishment.