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  • Commercial Property

    Returning industrial units to bare shells

    Why is it that industrial units must be returned to bare shells at the end of the lease?

    I know someone who is handing back an industrial unit they have been in for a number of years and it needs to be handed back bare.

    The landlord/agent quoted nearly £100k to do so, but they are getting their own contractor to do it for less.

    This involves removing full air-con system, all ducting, internal offices, all 3ph power and so on.

    I understand this is common practice.

    Why don't landlords see this as free improvements, which they can then charge much more for? A quick structural survey and electrical check on air-con and electrics, would surely cost nothing in comparison to the uplift in rent on a fully air-con'd unit with offices etc.

    Whoever moves in will almost certainly get most of this put back in.

    Just curious really, why is this done?

    The cynic in me says that the contractors who pull it all out, sit on it and when a new lease is signed can offer the new tenant a great deal on fitting the place out, with made to measure partitions and everything ready to go.

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    Hi,

    I own a number of commercial units and have first hand experience of this issue.

    In the past I have allowed the tenant to leave fittings which have includer Air con, quality offices, suspended cielings and solid wood floors to office areas.   Then no one who wanted the property has needed the same specification.   Consequently we have then removed everything and let the unit.  

    I have one now where I allowed the tenant to leave a full mezanine floor.   This cost thousands.   However someone who viewed it last week needs the height that the floor removes.   No matter what,, you can't win.  

    One person wants height for commercial vehicles while the former tenant used the property for warehouse and distribution of phone cases.

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    Stormbird is quite right.  No two tenants want the same thing.  I've just re-let an office having had the outgoing tenant remove several thousand pounds worth of partitioning.  Tenants prefer open plan so that they can do their own thing.  It's also the case that in terms of fixtures such as air con the landlord will find it hard to warrant something left behind by a tenant; inevitably it fails after six months and an argument ensues about who will replace it!

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    Its called Yielding up and is a key clause for consideration before entering into a lease, this clause should make it clear what is expected of a tenant as regards repairs, decoration and removal of alterations and signage at the end of term 

    Consider these provisions:

    Re Instatement - the tenants obligation to remove alterations and improvements at the end of the lease.

    Dilapidations - items of disrepair

    Schedule of Condition - a schedule of the condition of the premises at the commencement of the lease

    Just because you think that the works carried out improve the value of the property, it sadly does not mean you are immune from a dilapidations claim!

     

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    Proplend Borrower Team
     
    T: 0203 637 8418 |  http://www.proplend.com
    15 Little Green, Richmond, TW9 1QH

    Negotiate for the landlord to buy the parts if they have value. However stormbird is right - you cannot win! The standard state for a new tenancy is "shell and core". The landlord wants the tenant to pay to return it to that state,. 

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022