Real Estate guidance

To provide rapid access to all relevant and available Real Estate guidance as required by Commercial Tenants direct to the point of need. To make occupying commercial property easier and avoid the belief that seeking professional assistance needs to be expensive.
Our service will save you time and effort in searching widely for the answer to your problem, providing you with access to experienced consultants by telephone or e mail. Knowing where to turn, who to ask and, understanding the options available does not have to be difficult.
TAP-In to our program where we provide a flexible service and you can choose what you want. The comfort of regular updates to keep you informed with up-to-date industry comment and material relating to your occupation, such as Sustainability issues, Property Law, Health and Safety etc or access to Industry Bodies/Institutions, their websites and Guidance important to you. This information assists you, as a better informed Tenant, in your communications with your Landlord.
TAP In has been designed to...
SAVE YOU MONEY AND GENERATE VALUE TO YOUR BUSINESS BY BECOMING A BETTER INFORMED TENANT.

Business property issues

Every business occupies property and must deal with the issues which that entails.

Rent reviews, repairs, alterations, environmental compliance, health & safety regulation are just a few of the property-related issues that business faces.

TAP puts expert guidance on all of these just a phone call away. Our service is expert, impartial and cost effective.

Renewing a utility contract; is it becoming harder to secure good terms?

The downturn in the economy is having an effect on all sectors, not least securing favourable terms for the supply of electricity and gas contracts. This can result in some energy companies offering their customer’s very onerous renewal terms and in one instance a business was asked topayadeposit equivalent to7months usage in advance.

However this isn’t just happening to individual companies.It is also an issue managing agents face when their clients create complex tax structures for property ownership which an energy company cannot understand. As with all commercial businesses,energy companies tend toshyaway from risk and items they do not understand. Therefore having off shore companies with no assets or acceptable accounts will discourage an energy company offering good market terms. Tenants in a multi occupied building may not be exposed to the issues their Landlord’s managing agent is having in reaching good terms but in the current economic climate, with pressures to maintain service charges low it is almost certain they will be using their buying power to secure good terms, but it may not be easy. 

Openness and transparency of financial information is helpful and demonstrating a good credit history, with a clear company structure, will assist in securing the best terms possible. Furthermore, using an energy broker may also be helpful, as many will have long and trusted relationships with the larger gas and electricity companies, and may be able to support your requirement for more favourable conditions. If you do not have the comfort of having your energy bought for you through a managing

Resolving a service charge dispute without upsetting the Landlord

In response to economic pressures, Landlords and Managing Agents are reviewing service charge budgets to reduce running costs. In simple terms where service charge expenditure is a commodity such as electricity or gas, shopping to achieve the cheapest unit price is a prudent initiative. Where Landlords or Managing Agents are looking to reduce costs on service based contracts it may be difficult to achieve this without impinging on the service level offered. How should you challenge this or resolve a situation where you do not agree with a service charge apportionment or an element of expenditure? What ever action a Tenant decides to take, always look to preserve the relationship with the Landlord. Often this can be lost when a Managing Agent or Landlord refuses to discuss the matter.

So, what are the options?
 
There are several approaches to such a situation; the first would be to appoint a service charge specialist who can review the situation and share in any subsequent savings; the second would be for the tenant to persuade the Landlord or his Managing Agent, the error of their ways and convince them they need to reflect on either the level of service charge or the services on offer, or finally should the lease allow for it or an agreement is reached between the two opposing parties, to refer the matter to the RICS for mediation.

The first and second options often result in either souring the relationship between the Landlord and the Tenant, or a stalemate where neither is prepared to discuss the situation or concede the point. When a long unexpired period remains on the lease, neither of these options would be a good to note that in many instances where a lease contains a tenant break option it will be conditional on all other obligations being met in full. An unresolved dispute may affect thevalidity of any such notice.

Where discussions matters have stalled, consider referring sending the matter to mediation which is a simple and effective method to progress a dispute. So long as the Landlord and Tenant agree to allow this as a method of resolving a service charge disagreement, they must also agree to accept the findings of the expert. Agreeing to move along unresolved difficulties in this way will preserve the strong relationship between the Landlord and Tenant. In the current market this is of paramount importance.

The code for leasing business premises 2007

When you negotiate a new lease you should ask if the lease is to be “Code compliant”, and if not, you should enquire as to why this is the case as the Code has distinct advantages for tenants.  In the present financial climate, many landlords are finding it hard to get good tenants and therefore tenants should be aware that they are in a much better position to negotiate lease terms that are more “tenant friendly”.  The Code is advisory and not legally binding and therefore cannot be enforced by law on a landlord. It was, however, launched by the government to achieve a fairer balance between the landlord and tenant and greater flexibility in commercial lease terms.

It is important for a tenant to raise the matter of the Code at the negotiation stage so that any Code compliant terms are included in the Heads of Terms before they reach the lawyers advising on the lease itself. In this way, the actual legal side of the transaction should be cheaper and shorter in time to complete!

The main benefits of the Code for tenants are as follows:-

1. If you have a “break clause” in the lease the Code provides that the conditions attached to the break must be clear and any pre-conditions limited.

2. Rent reviews should be clear and should not contain provisions that are aimed to achieve a headline rent.

3. On transferring the lease the only restriction on such a transfer should be obtaining the landlords consent, which should not be unreasonably withheld or delayed, and with limited preconditions to such consent. 4. It contains recommendations as to service charge information which should be given to tenants at the negotiation stage.  5. It states that the tenants repairing obligations under the lease should be appropriate to the length of the lease and appropriate to the condition of the premises at the start of the lease.  6. It contains recommendations on alterations, change of use and insurance.

Do electricity meters measure enough?

Industries and professions across the country are firmly focused on reducing electricity usage, especially with the “cap & trade” CRC scheme which comes into effect in April 2010, but how can you meaningfully measure consumption?

It is safe to assume all buildings will have an electricity meter but what information can it provide? Simply, the information is basic providing just a measurement of units consumed. These days measuring usage is not enough as it is essential for companies to analyse their consumption “profile”. That is to say it is important to understand how the electricity is used and by what equipment. Once you understand this aspect you can then look at:

• Energy wastage – When all usage has ceased is there any equipment which is still on that may consume electricity but which is not required?
• High consumption data – When and what causes it? Is it necessary?
• Weather patterns – How do they influence usage?
• Benchmarking – Monitor regular usage and maintain a steady usage.

Larger users (where peak demand of electricity is above 100kW) will already have half hourly meters and the supplier company will be able to record usage every 30 minutes. However this data doesn't have any details attached to it so you can not record the consumption of individual items of equipment.  As a result more meters will need to be installed to measure the consumption of individual pieces of equipment such as pumps, chillers, lighting circuits and so on.  This will aide transparency of usage. The new “smart” meters will give more information to allow proper strategies to be adopted to reduce unnecessary energy consumption, and landlords are now moving towards installing this equipment. Hopefully savings will come from better use of this expensive commodity.

Your next Assessment.. How will you be rated?

The 30th September 2009 sees the publication of the new Rating List which will identify the Rates Liability of your premises, to be effective as of April 2010. The Rateable Value of your premises is re-valued every 5 years and the Valuation Office Agency use a date (The Antecedant Date) at which rental levels are assessed, and this process takes into consideration the prevailing market conditions at that time; for the forthcoming Re-Valuation. The Antecedant Date is 1st April 2008.

This date is of great significance because in many cases it represents just about the high rental point in the Property cycle and is to be compared to the low rental levels used at the last Revaluation in April 2003, which dictate your current Rating Bill.  Consequently your rateable value will probably see significant increases: with the Retail Sector seeing the largest average rises and London's West End Offices seeing the largest specific increases; most other sectors are likely to witness average rateable value increases of between 10-15%.

Space is limited to identify all of the likely Sector ''winners'' and ''losers'' but it remains clear that the 2010 Revaluation comes at a particularly unfortunate time when businesses are looking to reduce outgoings and will be faced with, in some cases, a doubling in their Rates assessments.

The message is to prepare for a likely increase in your Bills and budget accordingly; however as with past Revaluations the Government has introduced a scheme of Transitional Relief to spread the increases over the 5 year period...this has yet to be announced but is anticipated prior to 30 Sept ''.

The Green Lease Cometh....

As a conscientious EU Member state, the UK Government is obliged to implement all Directives issued and
commercial property occupiers are becoming subject to more and more EU and UK red tape with regard to Environmental objectives and how their use of commercial space affects carbon emissions and the knock-on effects thereafter.

We are becoming increasingly aware of Energy Performance Certificates/Display Energy Certificates that have emerged from the Energy Performance of Buildings Directive 2003 and now the Government's proposals for Carbon Reduction Commitment (CRC) from the Climate Change Act 2008, as just 2 examples but there is now an emerging trend for the Landlord and Tenant relationship to enshrine responsibilities and obligations towards better Environmental behaviour within the body of a Commercial Lease agreement.

The model for such a move has come from Australia where 8 Green Lease Schedules have been encouraged to be adopted in new leases which deliberately place burdens on both Landlords and Tenants to undertake certain measures; compliance by a Tenant, for example can be financially rewarded in terms of Service
Charge reductions, and should a Landlord fail in his obligations he could find a Tenant withholding Rent until matters are corrected.

The general thrust of all of this is to reduce energy consumption and improve efficiency, by-products of which can include assisting Business performance, improve Corporate image and help meet the CSR requirements of both parties. UK bodies such as The Centre For Research In The Built Environment (CRiBE, http://www.cribe.co.uk/) and The Better Building Partnership (BBP, www.lcca.co.uk) have both issued Guidance and the BBP, in particular is suggesting a set of principles and guidelines for a partnership approach rather than actually being prescriptive about actual Lease clauses. 

Owners and Occupiers can therefore agree which principles can be adopted in individual circumstances. They believe that collaboration is best documented in a legally binding and transferable Memorandum of Understanding (MOU) which can implement best practice recommendations into new leases and a set of
principles adoptable into existing lease agreements. 

The MOU should at least consider the sharing of data for Energy Efficiency, establishment of a Building Management Committee and cooperation on reduction strategies. Other general headings to be incorporated should include Water and Waste Efficiency, Service Charge (green rewarding benefits), fit-out and refurbishment, onsite renewables and CCHP, reinstatement and dilapidations, Managing Agents 'green' duties, transportation initiatives, inter alia.

One leading UK Asset Manager, Hermes,(http://www.hermes.co.uk/) has taken the Sustainability issue to the core of its UK business and believes that through Responsible Property Investment(RPI) it can both protect and enhance the value of its assets and this is now further reinforced by Research from the RICS (www.rics.org) which suggests for the first time that Green Rated buildings in the USA attract a higher market premium when being sold, than those without.

Clearly a benefit for Landlords/owners but it is clear that a trend is emerging linking value to behaviour and Landlords will need to offer up benefits to Tenants for 'green' activities if it can now be shown that Capital value can be gained upon Sale by so doing. If the Landlord gains, then Green leases should offer up Tenant
benefits too.

The Cost of Carbon Compliance is coming......

Last year the Government passed The Climate Change Act 2008 and this piece of legislation now requires those responsible for the purchase of electricity (in most cases Landlords) to buy Carbon Credit Allowances which will match the amount of CO2 emitted as a result of the use of this power. The regulations will capture those who use more than 6,000mwh per annum (approximately £500,000 per annum). This scheme is known as the Carbon Reduction Commitment (CRC) and obligatory and begins in April 2010. Those companies who meet and exceed the 6,000mwh criteria are currently being requested to register as "participants" within the scheme. This request involves declaring data collected from meter readings (half hourly data) and along with details of the property ownership, this information is used to forecast the "participants" usage and subsequently calculate the number of Allowances they will need to purchase for the period April 2010 - April 2011.

Although the scheme begins in April 2010 the "participant" will not need to pay for these Allowances until April 2011 when they will be required to buy Allowances for the period April 2010 - April 2011 and April 2011 - April 2012.

It is the Government’s intention for the cost of administering this scheme to be met by the Landlord.  However, the Landlord will look to the terms of the lease to recover the costs of these Allowances from the Tenant and so companies should begin budgeting for increases in the their service charge contributions. This new legislation will apply pressure on the property owner to rein in the amount of energy they use and as a result the need to measure usage will be at the forefront of how this is done. 

Landlords across the country who are recording their energy usage on a half hourly meter, and who fall within the annual £500,000 spend on energy, will be sent packs to register themselves as a “participant” in the scheme and although a property owner may register himself as a “participant” in the scheme it is not certain whether they will inform a tenant of their application. This is a self certification scheme and non compliance will receive a strict financial penalty and any participant not complying will be named and shamed.  Consequently a property owner will be under a strict obligation to comply. A tenant may wish to make his own enquiries of the managing agent or property owner to understand the financial implications of being involved in such a scheme, but the confusion may result in limited information being available.

Prudent Landlords will be adjusting their service charges and adding the certificate costs to the Energy Categories as of now and tenants should be wise to this and begin setting aside monies to meet this increase in their service charge budget. There is one good piece of news and that is should a landlord consume less electricity than the number of certificates purchased then a rebate will be made in the following October (2011 being the first). Be careful to monitor what your Landlord is doing and if in doubt ask questions.