8 Tips for Property Cost Control
Assure Consulting may have the very best lease audit and administration teams in place. But if the terms are poor, there is only so much that we can do.
When signing a new lease, there are a few basic requirements (outside of the hard commercial details around rent, which are usually handled fairly well). Here are our 8 Tips for Property Cost Control;
1. Get a Service Charge Cap –Amongst our client group, some almost always secure caps, others rarely do. When signing short term leases or short term extensions/renewals, this is particularly crucial. Additionally, avoid having the Landlord split out Energy costs from the capped amount.
2. Reduce Your Proportion – By addressing apportionment issues, you can get your share set at the most favorable level. You should exclude service charge charges for remote or poorly configured storage spaces, for example.
3. Consider Beneficial Use from Service – If there are services that you will not benefit from then exclude those costs.
4. Protection from Major Works – With Buildings neglected and deferred works feeding through after the pandemic, significant increases are anticipated. A cap is ideal. Where that is not possible, get some control, especially if you pay a high share. This might include consultation/approval on works (equating to say more than 10% of the service charge) prior to commencement.
5. Insurance Recharges – To be at “competitive market rates” or a watered down version that provides some protection.
6. Demised Energy Recharges – Make sure submeters are in place and funded by the landlord (if installation is required). Charges should be at competitive market rates and administered without profit.
7. Indexation Provisions – CPI is better than RPI but both are increasing rapidly, so think about an upper limit. Perhaps capping the increase to a maximum of say 3% per annum.
8. Pandemic Clauses – has it gone away? Many are inserting discounts if social distancing or lock downs (of some kind) are reinstated. Perhaps this type of business interruption clause should be broader than just a direct reference to Covid-19. Unfortunately, we’re currently living in a turbulent world.
These are some of the basic considerations for your non-rent lease expenses.
Professional advice/input from lease expense experts is the best protection. Even relatively small changes at the outset can have a significant impact. Yes, the lawyers do their thing, but those in the field have something valuable to contribute.