Many people choose to invest their hard earned money in to property investments, relying upon rental income and capital growth over the years as a return on their investment.
However, when buying commercial property, one must be careful to investigate the condition of the property prior to committing to purchase, even if on the face of it, it seems like a great deal. Many property investments are sold already with tenants in place, and, often, the tenants have FRI leases (Full Repairing and Insuring), putting the responsibility for maintaining the building on the tenant.
Problems can arise however when for example, the tenants lease is not assessed, and any Landlord’s obligations under that lease are overlooked. Common problems are:
- A landlord does not assess the costs attributable to the Landlords repairing and decoration obligations, and has to fund works up front before being able to recover monies from the tenant(s) via a service charge.
- Assumptions are made for example that the tenant will have to strip out and reinstate certain alterations. This may not be the case, with the costs of removal falling upon the landlord.
- Inherent defects become apparent, and the tenant is excluded from having to remedy because of a limiting clause in the lease in favour of the tenant, putting the onus on the landlord to remedy.
- Costs for maintaining void areas and common parts in a multi-let property are not considered, thus, service charge income only partly reimburses the landlords expenditure.
A pre-purchase survey will seek to assess the condition of a property, and look advise a potential purchaser of potential pitfalls associated with property defects and maintenance matters that could arise and impact upon the landlords investment.