Post pandemic has seen a flight to higher grade office space by Tenants, both in terms of the amenities on offer and the buildings ‘green’ credentials. For Landlords wanting to grab a piece of this market, the question often raised to agents is who is going to pay for the fit out.
For smaller office lettings it is often the Landlord who will be asked to procure the fit out works in return for a higher rent over the lease term. With construction cost inflation, there are added external pressures to account for in making this equation work for both parties.
The good news is that by factoring in the available Capital Allowances, which provides tax relief against certain property expenditure including ‘green’ technology, can significantly reduce the net cost of the fit out. For example, on a typical £1m CAT B fit out the Landlord or occupier, whoever is incurring the expenditure, could recover up to £250k by claiming Capital Allowances, or almost double that for individuals or partnerships.
Note that the benefit of Capital Allowances can be claimed by both parties and so it is crucial that the agreement is drafted accordingly and so it is advisable to take expert Capital Allowances advice to ensure the best outcome is achieved.
For expert Capital Allowances advice on how to structure lease agreements for fit out works, please contact one of our team to help.