Thursday, January 8, 2009

Progress report on new charity shop

Not an awful lot, I'm afraid. We are trying to purchase the remainder (5 years to run) of the lease of a shop on Burleigh street. This is turning out to be more complicated than we had thought, because this is an underlease (from Coral, the bookmakers), who in turn lease the shop from the Prudential Insurance, the freeholders. Because so many entities are involved, all of them need to agree before a final lease agreement can be signed—and we need to be satisfied that we aren't risking branch funds by making ourselves liable for unexpected costs.

Renting commercial property is rather different from renting a house or flat to live in because the landlord isn't normally the one who pays for any repairs—these are either done and paid for by the tenant directly or else the landlord does the repairs and charges the tenant. It's also different from buying a house leasehold, because a shop lease is basically just an agreement to pay rent for a certain number of years—the only "resale" value it has is the worth of any fittings put in by the previous tenant. So we have to take advice from a local surveyor about the value of the fittings and the probable cost of repairs during the term of the lease, and what we will need to spend at the end of the lease in order to return the unit to the condition it was in when Coral originally took it out. 

We also have to get confirmation from the ultimate landlord (the Pru) of the rent they will be charging. This is what we're waiting for at the moment, as we daren't take on the shop without knowing for certain what the rent is going to be over the next five years. 

We do know the current rent (we are not completely daft), but the sticking point is that this rent was due for review in February 2008. At that point shop rentable values were still fairly high in Cambridge, and it would be legitimate for the landlord to set the rent at an amount which would have been fair a year ago (i.e. more than the current value, and more than we could afford to pay in the current conditions). 

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