The ‘Bright Building’ in Manchester Science Park didn’t quite live up to its name!
How would you feel if you discovered your landlord had been overcharging your business for the last 6 years? More importantly, how would you get your money back?
It is a fact of life that mistakes can happen. In commercial property one of the simplest and most common sources of error is floor areas. The problems start when tenants assume, not unreasonably you would think, that the floor areas quoted to them are accurate. Regrettably, this is often not the case which can lead to some pretty expensive mistakes.
Take the case of a software development company we advised recently. They were one of the first tenants to move into the ‘Bright Building’ in Manchester Science Park, around six years ago.
Last year the business needed more space. So it decided to move into a bigger suite elsewhere in the building. However, before signing the new lease its solicitor recommended that it take independent property advice. We were recommended to them at that point.
One of the first things we do in circumstances like this is to physically measure the client’s office space, both the existing and the new. It sounds simple but measuring office space is not quite as straightforward as you might think. There are conventions, professional codes of conduct and even case law that need to be observed. So there is plenty of scope for errors to occur.
In this case, we discovered that the floor area of the suite was 14% smaller than had originally been quoted. This meant that over six years the tenant had been charged £35,500 in rent, service charge and building insurance for space it physically did not have. Having discovered this, what could be done? Could they get their money back or was it too late?
Thankfully, when confronted with the evidence the landlord in question accepted that an error had been made. To their credit, they agreed to pay back all the overpaid sums in the form of an extra rent-free incentive. This persuaded the tenant to press ahead with the new letting but not before we negotiated some additional enhancements to the lease terms.
The CEO was pleased to have had TAG’s input saying; ‘Thank you for all your help, and sharing your experience with us during this project - it was much needed, and hugely appreciated.’
This example involved a relatively small letting of just 1,600 sq.ft. and is by no means an exceptional case. I could point to even greater discrepancies involving much larger floor areas that have gone on for longer. So please, always instruct an independent surveyor to check your heads of terms before you sign a new lease and ensure that they physically measure the floor area of the space you are taking. The savings that result might surprise you!
If you would like more information about our due diligence services, please call Martyn Markland on 0161 457 1422 or email him at mm@tenantag.co.uk.