Renting Commercial Property

Renting Commercial Property

Introduction

You are either relocating your business or have decided to take the leap of faith and are seeking a brick and mortar establishment to start up your business, and you'd like to start off by renting as apposed to purchasing a premises.  In an ideal world, you would probably prefer to purchase your own commercial property, and own it completely. But like most common businesses, the first step would be to rent out until you have established yourself.  If you are a foreign business than renting a commercial premises is the natural way to do business.

Procedure

The procedure is very simple and legally sound, where once you have found the right commercial premises you will set a date for the contract, read the contract together with your legal advisor and simply sign. There is no law impeding you from signing a contract with a vendor however once must be sure that the commercial premises has the correct licensing otherwise you will fall into an uncomfortable position with the landlord.  

Types of Commercial Property

In Malta renting a commercial property is the most straightforward way of having a space in which to exercise your business. Whether you require an office from which to organise and provide a service, or whether you require a shop to turn into a boutique, the commercial property sector can cater for such relatively small commercial spaces. Yet commercial properties also include multi-storey showrooms, office blocks, warehouses, training centres, shopping malls, supermarkets, business centres, and such typically large set-ups, which would generally sell at prohibitive prices, but which would be rented out at affordable rates.  

Agency Fees

Agency fees are that of 10% from both lessee and lessor of a period of twelve months which is payable on contract.  Should there be a purse or key money  that is payable to the landlord, a 5% agency fee is paid by the landlord.

Starting your Search

The first and foremost thing to do is to contact a specialised RE/MAX Commercial agent who can guide you in the choice of the best commercial property for your very specific and unique requirements. The first questions you will be asked are most definitely concerning the character of your business, the way you plan to finance the rental, and the location where you may consider most ideal for renting this premises.  All questions have multiple reasons for being asked and from this space we will try to help you understand the estate agent's perspective and reasons for asking such questions.

Your type of business is most definitely the heart and soul which will characterise the goings-on of your commercial activity. If you are just starting out in a business venture, you are probably inexperienced and will need full guidance in this part of your business plan. On the other hand, if you are a seasoned businessperson, you will have very clear-cut ideas about your requirements, your limitations and the risks which you can or are willing to take.

The way in which you plan to pay the rental calls for a multifaceted approach and may be determined by the landlord. In many cases a landlord may demand the tenant to pay three or six months in advance and this has also been extended to twelve months, depending on the negotiations that have taken place.  There is no rule of thumb as to what the landlord would expect in terms of payment of rent in advance however the average works out to be quarterly in advance.

Expenses and Deposit

Secondly, you have to be aware that when you are renting out a commercial premises you will have a number of expenses to settle upfront before taking possession of the key to the premises. You will need to pay the first rental fee as well as security deposit amount that will be determined and agreed upon between yourself and the property owner as per contract. This deposit money will be retained by the property owner until  the time when you will relinquish your rental,  to cover any extraordinary expenses caused by damage or misuse. In certain cases the agreement may stipulate that the owner would have the right to keep all this security deposit without refunding any part of it.  

Finishing of Commercial Premises ⎟Key Money

Keep in mind that any changes to the premises will need to be done with the permission of the owner, at your own expense. It may be the case that when you are renting an office space that your business requires a separate layout and you require new soffit ceilings, specific lighting, new partitions and thus this cost would either be negotiated in the price or paid by the lessee.

If you are renting a going concern you may also require a negotiable amount of money to pay to the property owner for what is typically known as key money, which is in fact an amount of money to cover any accessories, furnishings, or internal decoration as may be useful and necessary for your trade and already present on the premises. If the property owner is also selling you stock, which you may be using to start up your own business, the amount of money to cover this sale will also be agreed upon and factored in your total expenses. In some cases you may require a bank loan to cover such expenses or other extraordinary expenses as would be required for transforming the property in the kind of commercial entity you need.

You may also need to get MEPA authorisation and permits to make such changes which may be effected by specific laws that protect such areas as village core. Even a shop sign will require the necessary permits to be erected on your shop front.

Even whilst you will not own your commercial property, you have to note that you will still need to obtain the required trading licences and permits pertaining to your trade category.  Needless to say, any insurance policies required to cover your activities will need to be shouldered by you.

Your RE/MAX Commercial estate agent will ask about the location you have in mind since this will affect both the high or low availability of vacant premises, as well as the price based upon the level of popularity of such location. A good location will not only cause a rise in renting fees, but on a more positive side will also help bring in more clients. Once you decide to close shop, you are more likely to get a good return on your initial investment, quicker.

With that information in hand, your RE/MAX Commercial agent will organise a number of viewings and eventually also help you negotiate agreements with the owner of the selected property on any eventual future increments in rental rates.  

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