Working in the commercial property field advising commercial landlords has opened my eyes to some horrific mistakes made by commercial organisations and individuals when taking a lease of commercial property. In my experience the Top Ten biggest mistakes made by Tenants when taking a lease of a commercial property are as follows:
1) Not employing a solicitor who specialises in commercial property. Let Divorce Lawyers deal with divorce. Let a residential specialist deal with residential property. Pay the extra money and get the best advice from a commercial property specialist.
2) Not taking full control and personal responsibility of the lease negotiations and progress. Never leave it entirely to an Agent or Solicitor. But do take their advice and chase them every day for a progress report.
3) Not preparing a schedule of condition and applying for Tenant fit out prior to lease signing. At best this results in duplication of legal fees and landlords costs. At worst the business cannot operate as envisaged if works planned do not receive landlords consent.
4) Not asking a Landlord to undertake repairs/contribute towards Tenant works prior to signing lease. Landlords are often willing to pay for capital expenditure to facilitate a letting. This is an easy win for a Tenant
5) Not understanding dilapidations obligations. Quite straightforward when taking a lease of a new property however many Tenants unknowingly take these obligations on when taking an assignment of a lease or when taking a lease of a second hand property that is in disrepair already.
6) Not understanding potential service charge liabilities and not capping them. When a tenant gets an invoice for his share of major works it could be too late to do anything about it.
7) Providing a personal guarantee to the lease or taking the lease in own name. I have seen in excess of a dozen individuals lose everything including their homes as a result of them signing a lease in their own name and being personally liable following default of a lease term.
8) Contracting out of s24-28 of 1954 Landlord and Tenant Act (UK only). A tenant that spend 000's of pounds fitting out an office was forced to vacate on expiry of his lease which was only three years long.
9) Accepting key clauses as being Time of the essence. I have witnessed several Tenants miss an option to break a lease. In one case resulting in them remaining liable for another Ten years on a surplus property. The employee responsible for exercising the break was not aware of the specified timetable within the lease for serving a valid notice.
10) Unknowingly taking on environmental liability. Common with property located on industrial estates. The Landlord goes bust leaving the tenant to pick up the cost of environmental clean up even where the mess was caused by a previous occupier!
Examine the full detail and examples of these common mistakes later this year on steelbee.com.
Article Source: http://EzineArticles.com/?expert=Campbell_James
Wednesday, July 25, 2007
Monday, July 2, 2007
Dirty Tricks- Gazundering
Definition: Last minute cut in offer price by prospective purchaser.
When does it apply?- Sale of residential or commercial property.
Why do it?- Either to save money on acquisition of property or (less frequently) to scupper a competing sale by a competing owner of a rival property.
When does it happen?- Usually close to exchange of legal contracts and usually when the buyer is in a stronger "position" than the vendor.
How to do it- (Example) Make an offer on a house. The house is removed from the market by the vendor or their Agent and solicitors are instructed to progress towards exchange of contracts. Just before contracts are exchanged you raise an "issue" with the house. For example you state that a belief that the wiring needs to be replaced or that there are concerns with the drainage or whatever weakness is specifically plausible and could be applicable to the condition of the house. Ideally this is something that is based partially on a fact. It may have been picked up during your due diligence procedures or by your surveyor but you exaggerate the importance to gain the position of strength that you need to use as leverage. Phone the vendor (preferably direct) and tell them that due to your recent findings that you have no alternative than to deduct £X000's from the purchase price to cover the cost of the "defect". Preferably you have in hand some quotations from a "friendly contractor" to substantiate your figures. Just as long as the vendor does not know that the quotation is from you brother in law/cousin/godfather/long term family friend!
Why do vendors fall for it?- They don't always. But whether they believe you or not they are left with this decision- Agree to your reduced offer and proceed with the sale or re-start marketing the property. They have often incurred legal costs or may even have exchanged contracts for their new house pending the sale of their current home.
GOLDEN RULES fOR GAZUNDERING - STEELBEE.COM
1) You must have a fall back position and be prepared to lose the deal. Ideal if you like three houses but can't decide which to go for. Gazunder all three and see what happens. Just make sure that all three are using different agents! Do not worry about offending agents by pulling out of deals, they just want their commission.
2) Stronger position of Buyer = More money off (whether market related, or personal circumstances).
3) Try and establish by hook or crook from the vendor of their agent the lowest price acceptable to them. Do not ask directly as first but try and work it out.
4) Maintain good relations at all time with the vendor and their agent.If they like you they are more likely to believe you.
5) Apologise for your change of offer but explain that due to your recent findings you have no choice.
How do I avoid gazundering?- Difficult in a free market environment which allows it to happen. At a minimum extensively pre-qualify your prospects and make it clear from the very start that you will not reduce the price any lower than the advertised asking price. Have back up purchasers and keep them sweet while you move towards exchange. Leave the For Sale sign up but show the property is under offer. Your agent has a duty to tell you about offers received. You never know you may even get a chance to gazump a gazunderer. What a result that would be. Read More at www.steelbee.com
When does it apply?- Sale of residential or commercial property.
Why do it?- Either to save money on acquisition of property or (less frequently) to scupper a competing sale by a competing owner of a rival property.
When does it happen?- Usually close to exchange of legal contracts and usually when the buyer is in a stronger "position" than the vendor.
How to do it- (Example) Make an offer on a house. The house is removed from the market by the vendor or their Agent and solicitors are instructed to progress towards exchange of contracts. Just before contracts are exchanged you raise an "issue" with the house. For example you state that a belief that the wiring needs to be replaced or that there are concerns with the drainage or whatever weakness is specifically plausible and could be applicable to the condition of the house. Ideally this is something that is based partially on a fact. It may have been picked up during your due diligence procedures or by your surveyor but you exaggerate the importance to gain the position of strength that you need to use as leverage. Phone the vendor (preferably direct) and tell them that due to your recent findings that you have no alternative than to deduct £X000's from the purchase price to cover the cost of the "defect". Preferably you have in hand some quotations from a "friendly contractor" to substantiate your figures. Just as long as the vendor does not know that the quotation is from you brother in law/cousin/godfather/long term family friend!
Why do vendors fall for it?- They don't always. But whether they believe you or not they are left with this decision- Agree to your reduced offer and proceed with the sale or re-start marketing the property. They have often incurred legal costs or may even have exchanged contracts for their new house pending the sale of their current home.
GOLDEN RULES fOR GAZUNDERING - STEELBEE.COM
1) You must have a fall back position and be prepared to lose the deal. Ideal if you like three houses but can't decide which to go for. Gazunder all three and see what happens. Just make sure that all three are using different agents! Do not worry about offending agents by pulling out of deals, they just want their commission.
2) Stronger position of Buyer = More money off (whether market related, or personal circumstances).
3) Try and establish by hook or crook from the vendor of their agent the lowest price acceptable to them. Do not ask directly as first but try and work it out.
4) Maintain good relations at all time with the vendor and their agent.If they like you they are more likely to believe you.
5) Apologise for your change of offer but explain that due to your recent findings you have no choice.
How do I avoid gazundering?- Difficult in a free market environment which allows it to happen. At a minimum extensively pre-qualify your prospects and make it clear from the very start that you will not reduce the price any lower than the advertised asking price. Have back up purchasers and keep them sweet while you move towards exchange. Leave the For Sale sign up but show the property is under offer. Your agent has a duty to tell you about offers received. You never know you may even get a chance to gazump a gazunderer. What a result that would be. Read More at www.steelbee.com
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