This is a free guide provided to give a basic understanding of some of the most commonly used commercial property jargon used. We would encourage all occupiers to make their own detailed investigations and use professional legal advice when purchasing or leasing a property.
More commonly thought of as stove to be found in a farmhouse kitchen; an AGA in property terms is an “Authorised Guarantee Agreement” – a guarantee by an outgoing tenant to the landlord that the incoming tenant will meet its responsibilities under the lease. i.e. If the new tenant defaults on the lease, the original tenant will remain responsible for the rent and obligations of the lease.
A tenant’s right under the terms of a lease to dispose of a lease if they no longer want the property. Usually a lease will permit sub-letting or assignment with conditions.
A lease assignment is the handing over of the lease from one tenant to another tenant; this normally requires landlord approval and will be detailed in the lease.
A break clause, is a tenant or landlord’s ability to bring a lease to an end early. This is normally subject to very specific conditions.
A tax that businesses have to pay to the local authority, based on the rateable value of the property, this is reviewed every 5 years. The rateable value is based upon the annual rentable value of the property.
The value of the property.
All commercial properties are categorised in planning terms, to allow them to be used for certain uses – eg: retail or industrial. Change of use is moving from one planning use to another. This normally needs consent from the landlord as well as the local planning authority.
Covenants are basically the terms and obligations of the lease. eg The tenant agrees to pay the rent and keep the property in good condition.
The property demise, is the area (normally a red line on a plan) showing the extent of the property.
At the end of a lease a dilapidations assessment is made outlining the damage or wear to a property that needs to be fixed under the terms of a lease.
The right of a landlord to bring the lease to an end early, if the tenant has not complied with the terms of the lease.
Ownership of the property outright.
Full Repairing and Insuring lease, this is the normal scenario where the cost of all repairs and insurance lie with the tenant.
Is a measurement of floor area, the Gross Internal Area is all the areas within the perimeter walls of the building.
A lease of the land to a tenant who then build on it (these tend to be fairly long term leases of 99years or more).
An agreement that someone will be responsible for the rent if the tenant fails to pay rent etc.
The person who gives the guarantee is called the guarantor.
The landlord of a landlord. This generally only occurs where properties are let and then sub-let etc.
This is the annual rent ignoring any rent free periods or other incentive that landlords may have given.
A document prepared normally by the vendor’s property agent that details a summary of the terms agreed, in order that the solicitors can formally document a lease or purchase.
This is where the tenant is responsible for “Internal Repairs Only”, and the landlord is responsible for the external fabric of the building, although this is normally reclaimed by way of a service charge.
The person or company that rents a building or land to a tenant.
The most important part of this legislation is part 2 of the Act that gives the tenant the right to renew the lease on the same terms as the existing lease. Many leases are specifically excluded from the ’54 Act to prevent automatic renewal.
A legal contract between the landlord and tenant that sets out the rules by which the tenant is allowed to occupy the property.
A licence is normally a short term contract that gives a right to occupy a property for a limited period.
If a tenant wishes to carry out works to alter a property; eg installation of additional windows then they will be required normally to seek landlords approval, and this is documented via a licence for alteration.
This is a measurement of floor area, Net Internal Area, and is all the useable floor area of the property excluding toilets, kitchens, dividing walls etc.
Alternative word for a property.
This is normally a cash amount paid up front, and maybe used to reduce annual rent etc.
This includes SDLT, legal, surveyors, agent, valuers fees and survey costs etc.
The best market rent achievable.
The amount the tenant regularly pays to the landlord, normally a quarterly basis.
An opportunity to review the amount of rent paid during the term of the lease, commonly at 3 or 5yr intervals, the terms will normally be upwards only, or indexed with the retail price index, but the specific conditions will be detailed in each lease.
The condition that a tenant is expected to maintain the property in. Essentially if something is broken it needs to be fixed by the tenant.
A clause in a lease that restricts the tenant in some respect. eg Must not use the property for illegal of immoral purposes.
A document normally photographic that details and records the state of repair or a property prior to a new tenant taking occupation.
The right for a tenant to renew the lease when it expires – see L&T Act 1954.
A fee paid by the tenant to the landlord or management company for the management or upkeep of the building, this maybe cleaning, security, grass cutting etc.
If you rent a building from someone that is not the freehold owner of the building then you are a sub tenant.
Stamp Duty Land Tax – A tax paid to government based upon the purchase price of a property, For commercial properties less than £150,000 there is no SDLT.
This is alternative wording for lease.
The person who rents the property from the landlord, sometimes referred to as the lessee or leaseholder.
The length of time you rent a property. The lease period.
Bringing to an end a lease, this is not always lease expiry but can also be due to default etc.
Fit out of a property so that the building is available for immediate occupation.
The categories that buildings and land are put into under the Town and Country Planning Order 1987 (as amended). Each class dicates what the property can be used for.
A method of dividing up retail properties into areas for valuation purposes. This recognises the front part of a shop is more valuable than the back of a retail shop or areas on other floors.
The total area used to calculate the rent of a retail unit, taking all of the zones together is called ITZA.