How to avoid common commercial property problems

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Commercial property rented to business tenants can provide good rental yields and capital growth, even after considering monthly commercial mortgage repayments. There are several common issues that affect commercial property landlords, but these can be dealt with.

If a tenant becomes insolvent, the landlords will have an empty property with no rental income but will still have to pay mortgage payments and rates. Landlords need to thoroughly research the financial status of prospective tenants. If a proposed tenant is a company, a copy of their recent accounts can be downloaded from Company’s House and this can show whether they are financially stable.

A tenant who vacates the property may leave it in disrepair. To lessen the financial impact, a lease can stipulate that a tenant provide guarantors who ensure that the tenant complies with all lease conditions, including leaving the building in a good condition. A landlord can also insist on a guarantor paying the rent if the tenant stops rent payments.

The lease needs to be well drafted so that, if the tenant sub-lets the premises without the landlord’s permission, legal steps can be taken to prevent this.

Empty premises can be targeted by vandals, squatters and thieves. When a building is vacated, it should be secured properly. A security company can be hired to regularly visit the building to deter intruders.

Like all businesses, investing in commercial property is not without risk, but if landlords are aware of the risks, they can take steps to minimise them.

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