Strategic decisions

Appoint a commercial agent to check your lease

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You now need to bring in a commercial agent to advise the steering committee. At this stage he will look at your existing premises and lease. Later on the commercial agent will be responsible for acquisitions or disposals of property. You need to know how easy or otherwise it will be to move out of your existing premises should this be necessary, and what it might cost. Your commercial agent will advise you on such matters as break clauses, restrictive covenants etc.

This is an important part of the process. Your existing lease may tie you in to paying rent to your landlord for many years to come, and other conditions may also be attached. This might mean that you cannot move if you need to until you are sure that you have assigned your lease or sub-let your existing property or found some other way of relieving yourself of the burden.

Your commercial agent will also need to check your position with regard to dilapidations. It is likely that you will be liable to your existing landlord for any repairs or maintenance that need to be done to return the building to the condition it was in at the start of your lease. Failure to deal with dilapidations can result in your landlord seeking to recover the costs from you, and also any losses that he may have incurred as a result of the failure. It is advisable to tackle this issue early to ensure that any necessary arrangements can be made. This is particularly important because in many cases your landlord may not intend to re-let the building as it stands. He may have plans to refurbish it or even redevelop. Talking to him early about dilapidations may mean that you can agree with him a financial arrangement that will make it unnecessary to carry out any repairs needed.

The agent will normally work for a firm of surveyors. The term chartered surveyor is a registered title of the RICS (Royal Institution of Chartered Surveyors) and it is illegal for a firm or individual to use that term if not a member. The terms surveyor and agent are not registered, however, and as such anyone can use them. Care should therefore be taken when selecting a commercial agent.

NB: there are some very good commercial agents who are not members of the RICS.

IQ Checklist 8.1 Commercial agent: services offered; selection criteria

Services offered

Advises on existing lease obligations
Advises on property market issues
Selection of premises
Negotiation of leases, rents and heads of terms
Disposal and marketing of surplus property
Rating and valuation
Investment decisions related to property
Development options
Advises one side or other in the negotiation, not both. i.e. landlord or tenant

Selection criteria

Track record
Look for experience of your type of project. Ask for references from current clients and visit completed recent projects. Find out about their reputation.

Qualifications
Membership of the RICS (Royal Institution of Chartered Surveyors) is most common. Remember, however, that many good commercial agents are not members of any professional body.

The people
What is their technical skill and knowledge?
Are you going to be able to get on with them through the life of the project?

Resources
Can the firm handle your project – is it too big, is it too small?

Location
Is it important for a firm to be close to you or close to your site? (It might be more convenient for you to have easy access to your team than for them to have easy access to your site)

Communication
Do they use your language, or do they speak in jargon you don’t understand?

Understanding
Do they appear interested in, and understand your needs and your brief. If not, it is doubtful you will ever get what you want from them.

Overall abilities
Do they have the ability to implement the brief and achieve your objectives?

Local knowledge
This is the most important consideration. This will include rent or price levels and availability of suitable premises.

A national or international network
This can be of value if you need to reach a wide audience for a property you need to sell, or you are looking far afield for a new office.

Fees
The levels vary, but in comparison with the risk of the rent payable being miscalculated, the variation in fee is negligible and it should not usually be a criterion for selection.

Is what you see what you will get?
Check that the people that you meet during the selection process are the people that you will work with, and not just “front men”.

Financial status
Do they have the right level of financial stability and insurance cover to survive the sometimes financially precarious property industry?

Check list links:

IQ Checklist 8.1 Commercial agent: services offered; selection criteria

Services offered

Advises on existing lease obligations
Advises on property market issues
Selection of premises
Negotiation of leases, rents and heads of terms
Disposal and marketing of surplus property
Rating and valuation
Investment decisions related to property
Development options
Advises one side or other in the negotiation, not both. i.e. landlord or tenant