Archive for the ‘Property Management’ Category

How much to rebuild your building?

Friday, September 30th, 2011

Catastrophe can strike at any time

If your premises burnt down or were flooded where would your business be? 

Could you move out and continue elsewhere as if nothing had happened?

Would you have to stay and put it right?

If you own the premises could you afford to fix them or would your business be destroyed?  Even worse, would you still have to pay-off a loan on them?

Whether we like it or not, buildings insurance is a necessary evil.  We cough-up each year for something that might never happen.

It’s tempting to skimp on the premium to save a few pounds but to under insure could be a nightmare.  When disaster strikes the Loss Adjuster (note the word ‘Adjuster’) will be out to limit the insurer’s liability.  If you’re 20% under insured they will pay out 20% less than you need; then where do you fund the shortfall from?

If you’re over insured you will be paying too much.  That’s safer than being under insured but you’ll be paying too much year-on-year.

Who knows what the right sum to insure for is anyway?  Don’t trust your broker to get it right.  What does he know about rebuild costs anyway?

Don’t be misled by the price you paid for the property.  Commercial value is measured by the use to which it can be put, its location and possibly the condition it’s in. And the price will include the land.

The cost to re-build is completely different.  That will depend on the size, design and materials used.  The rebuild cost is often hugely disproportional to the market value, a common problem where historic or iconic buildings are used for normal commercial uses.

Chartered Quantity Surveyors are experts in building costs.  They can help you get it right so you don’t pay too much or too little.  And, when the Loss Adjuster comes trying to reduce the pay-out, a QS is well placed to fight your corner to make sure you don’t lose out.

PV, or not PV, that is the question

Wednesday, July 13th, 2011

The door-bell rang.  I opened the door to a cowering salesman “I’m not selling anything” he whimpered “I just want to save you some money on your electricity bill”. 

This guy wasn’t from Scottish Energy or any of the other Gannets trying to woo me away from my current provider.  He was offering to install photovoltaic panels (PV) on my roof – for free!

The contract was for 25 years.  The deal was that I use the energy they create to save on my bills and they collect the feed-in tariff.  After 25 years the PV panels were mine, at no extra cost.

He took-out his I-phone, tapped his way to the compass app and checked my roof orientation (I know it faces East/West) and confirmed that my roof was ideal.  His colleague would be visiting a neighbour tomorrow, could he call in to talk it through?

PV can look neat when it's designed-in

I know South-facing is the optimum direction.  And, not being one for ‘appendages’ on the outside of my house (I won’t even have a TV aerial or upvc windows) I said I would think about it.  And I did.

So, I use the energy they create.  But we’re out all day and, as PV doesn’t work in the dark most of the energy will be fed back into the grid; they gain from that, not me.  Wonderful!

I looked on the ‘net’ for alternatives; there are loads out there.  I could buy the PV  and collect the feed-in tariff myself .  But the pay-back is estimated at 10 years, and that’s for optimum orientation. So it would be longer for me.

I’m nearly 60 and looking to down-size in the next few years.  So considering the options:

If I take their offer I might save a few pounds in the short term, but the house would be lumbered with ‘their deal’ when we moved.  New owners would be prevented from installing their own system and collecting the feed-in tariff.   PV panels don’t look pretty.  How do I repair my roof if I need to?  The technology will go out-of-date.  And the house owner will have to pay to remove them after 25 years when they break down. What affect would this have on the value of my house? 

If I installed my own I’ll have moved before they’re paid for.  The technology will be ageing.  They could devalue the house.  And who can rely on any government’s promise to last 25 years? 

Retro-fitting anything is never as good as designing it to fit in the first place.  A development in Derby has incorporated PV within the construction and, I have to admit, it looks neat.

So, I don’t think PV’s for me, but it might be for you.  There is much to think about.  And don’t be swayed by the door-step salesman.  Do your homework.

Why a surveyor should appraise your draft lease

Wednesday, June 1st, 2011

A property lawyer challenged me recently to explain how a surveyor could add to his legal advice for a tenant taking a new lease.

 I explained that it’s not until you try to apply some of the clauses to practical situations that you realise just how unreasonable, unworkable and inadequate some lease are.  It’s the experience of using them that a surveyor can bring to the pre-lease negotiations.

All too often leases are drafted and negotiated between lawyers with little regard for the intentions of the parties.  And inexperienced tenants expect their lawyer (if they have one) to protect them and the lease to include the promises made by the letting agent when he was closing the deal.

But all too frequently historic precedent documents or ‘standard leases’ are regurgitated regardless of the nature, age, location and condition of the building or the lease term.  I believe it’s not enough to insert the ‘agreed’ Heads of Terms and leave it at that.  They need to be put in context of both parties’ intentions, the whole lease and the particular building.

Dilapidation claims relate mainly to: Standard of repair, cleaning and redecoration, reinstatement of alterations, landlord’s fixtures and fittings and loss of rent.

I’ve seen covenants fit for a property in Mayfair applied to a run-down tin shed

Repairing covenants vary greatly.  I’ve seen covenants fit for a property in Mayfair applied to a run-down tin shed on an industrial estate.

I’ve heard it said “The rent is low to reflect its condition” and then torrentially worded repairing clauses applied far exceeding the reasonable intentions of the parties.

A short lease on a nearly new office building required the Tenant to clean all the brickwork and concrete at the end of the term.  How can that be reasonable? How often are building facades normally cleaned?  What would be the loss if it wasn’t?  A specific requirement to remove any graffiti, paint, oil or grease, or such like would have been more appropriate.

On the other hand cladding manufacturers specify cleaning and repainting regimes for maintenance of their cladding.  This should be covered specifically, but never is.

Decoration clauses are frequently inappropriate.  I’ve yet to see the wallpaper, graining and French polishing referred-to in the lease for an engineering workshop.

I’m not just suggesting ways to protect the tenant.

How can the Landlord’s surveyor know whether the Tenant has made alterations or removed Fixtures and Fittings without a record attached to the lease.

And why would a landlord want to relieve his tenant from the obligation to redecorate internally at the end of his lease because he’s done it in 12 months previously?  The Landlord is going to expect the place clean and freshly painted.

An experienced surveyor understands the financial implications to both parties of these ‘throw-away’ clauses included in leases and can bring some common sense to the drafting

Lease end? Don’t do nothing

Friday, October 8th, 2010

If you rent your business premises on a commercial lease you need to be ‘on the ball’ when you hit the final year.  Read the lease carefully and take professional advice; its a legal document and can be a mine-field

To do nothing can be  disasterous.

If you want to stay put you could end up ‘out on your ear’ or, if you want to leave, you could end up paying rent for another few years! It’s so important to get the legals sorted out. And in good time too!  Notices may need to be given by certain dates or other actions taken.

The practicalities can be just as important.  It can take months to find a new property, then further months to negotiate a new lease.

The cost of moving and ‘kitting-out’ new premises will cost more than you thought; and don’t forget the Dilapidations bill!

If you want to know more get in touch with Chris Mills at Barlow & Associates