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to think this is grossly unfair and complete robbery?

(33 Posts)
RentANDBills Tue 08-Nov-16 12:29:05

I'm looking into starting a business and will need to have premises to trade from.
I'm based in Central London so property is impossibly, eye-wateringly expensive.
I've spent a long, long time looking at listings and trying to find something suitable.
I've finally found a small industrial unit (1000 sq.ft) for a "reasonable" rent; at £27,000pa. already I'm being robbed
On top of this I would need to pay a £5,000 pa "service charge".
And then amenities and business rates on top of that.

Now, I'd finally got my head around the fact that I'd be paying out £32,000pa plus costs for a glorified shed when I discovered something referred to as "Lease Premium".

The landlord expects to receive an additional lump sum of £20,000 (plus VAT). It is non-refundable, it is not a deposit (that also has to be paid) and is a fee payable to the owner for accepting the transfer of tenancy from the “old tenant” to the “new tenant”.
In this case, for a lease that is for 3.5 years.

Bearing in mind that in commercial leases, the tenant takes over responsibility for the maintenance and care of the building - should the roof collapse, for example, that would be the tenants responsibility. So the tenant is actually paying to maintain or increase the value of the property, without actually benefiting from it (other than being allowed to use it for a set period of time).

AIBU to think that there is something very very very wrong with this?
How can this even be legal?

I must be missing something here.

(Also, I apologise for such a boring AIBU. Commercial land law, snore! But I'm aghast and needed to rant!)

Owllady Tue 08-Nov-16 12:32:30

It is eye watering isn't it? Could you move further out?

RentANDBills Tue 08-Nov-16 12:34:19

Owllady unfortunately not. The success of the business would be largely based in its location sad I'm almost positive that it would be very very successful (working on a business plan to look into everything in detail) but the upfront costs are absolutely terrifying.

FleurThomas Tue 08-Nov-16 12:36:41

What do you do? Loads of places near Canary Wharf that allow you to share office space with other small companies when required. Some join premium gyms like Reebok for 100/mth and use their meeting rooms. Depends on your business though.

BitOutOfPractice Tue 08-Nov-16 12:39:36

Would it be cheaper to buy?

RentANDBills Tue 08-Nov-16 12:40:22

FleurThomas I have looked into that, and into just hiring out small venues on an as-needed basis but we need dedicated space.

Its an art-based business, providing classes and other such things so it would be really difficult to pack up properly after each and every session.
Some of the areas we're looking at need dedicated equipment (think 100kg+) which obviously need a permanent home.

RentANDBills Tue 08-Nov-16 12:41:14

BitOutOfPractice That's currently what I'm looking at smile it's madness to think it would actually be cheaper to buy than to rent! But at least we'd benefit from any money spent on the building.

Owllady Tue 08-Nov-16 12:47:58

Ohhh what kind of art stuff? Are you talking about a press?

InfiniteSheldon Tue 08-Nov-16 12:55:02

This happened to us except the council was the landlord and demanded a huge premium for the privilege of an arch on top of rent/service charges/rates bloody robbery we had to blind bid as well

RentANDBills Tue 08-Nov-16 13:00:54

Owllady All kinds, really. I've noticed a gap in the market locally for pottery classes; I already have a kiln so that's one tiny drop in the ocean less expense. Also screen printing and letterpress printing as you mention.
Lots of traditional crafts, there are a few places reasonably locally but they are booked out 6 months + in advance and there's nothing in our immediate area.
I have a good background in art and business so I feel I could make it work - but I've never dealt with a commercial lease before and don't have the £750,000 I'd need to buy a shed premises!

InfiniteSheldon Its criminal. Almost a monopoly of sorts, as landlord's/councils hold the market so they can just charge whatever they'd like as they won't be undercut.

Owllady Tue 08-Nov-16 13:07:03

Oh that sounds fab smile you will have to tell us all when it's up and running. I was surprised how many 'leisure' art courses require a portfolio in London. I believe art should be accessible to everyone. My background is textiles and I've managed to do filmmaking workshops with children with quite profound special needs etc. There should be something for everyone imo.
Good luck smile it sounds so exciting!

Owllady Tue 08-Nov-16 13:07:54

Feltmaking not filmmaking grin

ittybittyluna Tue 08-Nov-16 13:09:49

That is ridiculous. I sympathise OP. When you do get it up and running please do let us know - I would love to take a class in letterpress.

RentANDBills Tue 08-Nov-16 13:17:26

Haha, I will do Owllady and ittybittyluna

I'm looking into grants/loans with the Arts Council too as I want to have a significant section dedicated to art therapy - I used to go to a pottery class in the Midlands that had day classes on for those with additional needs and it was wonderful.
I'd like to do community projects too and have concessionary courses available for those on a low income.

It could be wonderful - but the first speed bump is collasal!

LurkingHusband Tue 08-Nov-16 13:21:40

If only there was an Uber for office space.

Oh, there is:

OK, startup, in Hong Kong. But your post suggests there may be a market closer to home ?

Personally I would be very wary of sinking too much money into London property at the current time. If you have to, try to get a break clause for 12 months from now. You might find they'll be paying you to rent.

QueenJuggler Tue 08-Nov-16 13:21:42

The reason there's a gap in the market locally is probably because the revenue and costs don't balance.

BoffinMum Tue 08-Nov-16 13:35:07

I would do a deal with a school/FE college for space in return for them having access to the sexy piece of equipment.

Highfivethatfart Tue 08-Nov-16 13:37:37

I have no words of wisdom but am also aghast and am happy for you rant. Sounds like 100% daylight robbery but I expect there is some stupid legal reason why there is such a thing as Lease Premium. Good luck with it all though - hope the venture goes well.

RentANDBills Tue 08-Nov-16 13:53:01

LurkingHusband That's an excellent point.
We'd be hanging back for the next 6-12 months, partly because of this and partly to get a better idea of the market in general. My other small business is currently suffering from Brexit as all of my suppliers have massively increased their prices.

QueenJuggler That was my initial thought. I have huge long spreadsheets going over each detail. I've almost become a business stalker and analysed similar companies in the area. Despite the extortionate rental rates, there still seems to be a healthy profit to be made.
I'd actually written a colossal reply detailing the breakdown but realised that I don't want to bore you to death!
The summary is that by just offering one type of class the revenue would be £1050 after teachers were paid. All in (rent, rates, lease premium, utilities, service charge) the cost of premises would be £868 a week. I'd aim to provide several more classes plus other such ideas. So the basic expenses would be covered with one class, anything else is profit.
There is a real demand for it, I came across it after being told to join a 6 month waiting list for a pottery class!

A huge chunk of my problem is confidence. I've crunched the numbers, rounded up expenses as if I'm trying to convince myself I can't do it. I come from a working class background where I was taught that if I wanted to make money I needed to become a lawyer or a doctor.
There is an insidious line of thinking in my family that women can't do business either, which just fuels me.

Rant over blush

RentANDBills Tue 08-Nov-16 13:56:15

BoffinMum That made me laugh. (Also a very good idea, I'll add that to the research list) I think some of the equipment is exquisite. DP gets slightly worried about me finding a Victorian letter press exciting.

Highfivethatfart Thanks smile its all a bit pie in the sky at the moment, I'm drowning in spreadsheets and bore DP to death with hours and hours of research in the evenings. I was talking in my sleep about it last night, apparently. I'd say I need to get a hobby, but this is it!

LurkingHusband Tue 08-Nov-16 13:56:43

We'd be hanging back for the next 6-12 months, partly because of this and partly to get a better idea of the market in general. My other small business is currently suffering from Brexit as all of my suppliers have massively increased their prices.

Brexit ? Causing price rises ? Stop being so silly. Didn't you read it's all due to next weeks super bowl. Or is it super moon. Or moon bowl. Or the alignment of Jupiters moons. Or something - anything else.

RentANDBills Tue 08-Nov-16 14:09:04

LurkingHusband Sorry, I must have made a typo. Of course its because of the Moon Bowl. How silly of me!

QueenJuggler Tue 08-Nov-16 14:27:15

I'd love to do more art classes. Problem for me is being away with work too much for weekday ones to work, and weekend art classes don't seem to be decent quality.

Good luck - it sounds like a good idea if the finance work out. Don't forget about raw mat costs and insurance. Insurance for one of our businesses is eye-watering.

Adarajames Wed 09-Nov-16 02:22:33

Our local adult ed classes are closing from not enough students, and are pretty well subsidised, (although still not affordable to me angry )so I'n surprised you feel you'd be able to run a profitable business offering such courses when non profit making courses can't afford to run, are you in a particularly wealthy part of London then?!

kathArtic Wed 09-Nov-16 06:46:57

Me and DD would love to do pottery, especially after watching that pottery programme on TV last year...but we are up north sad.

I m sure you have crunched the numbers, but would echo Adarajames concerns though, is there enough money to be made? Whilst I would love to do this I only have a small disposable income so there would be a ceiling on how much I would be prepared to pay. You definitely need to tap into the London money and be open from dawn to dusk.

Could you join up with an existing 'business', say as a teacher, to gauge demand - or 'rent a space' and build up clients?

Are there any start up premises

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