Reverse premium - Revision history

Designing Buildings at 08:50, 11 December 2020

2020-12-11T08:50:03Z

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	* Tenant.		* Tenant.

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Designing Buildings at 15:24, 16 May 2018

2018-05-16T15:24:46Z

← Older revision		Revision as of 15:24, 16 May 2018
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	A reverse premium is a capital sum paid by a landlord or outgoing tenant to induce a new tenant to enter into a leasehold agreement. This differs from an ordinary premium whereby the capital sum is paid by the purchaser of a leasehold interest to the landlord or outgoing tenant.		A reverse premium is a capital sum paid by a landlord or outgoing tenant to induce a new tenant to enter into a leasehold agreement. This differs from an ordinary premium whereby the capital sum is paid by the purchaser of a leasehold interest to the landlord or outgoing tenant.

−	The reasons for a reverse premium being paid could be to do with the rent on a building being above market rates, there being something undesirable about the building, or some other reason which makes the leasehold onerous in some way for the landlord or current tenant. The reverse premium ~~therefore~~ acts as an incentive for the purchaser to take the leasehold liability ~~off their hands~~.	+	The reasons for a reverse premium being paid could be to do with the rent on a building being above market rates, there being something undesirable about the building, or some other reason which makes the leasehold onerous in some way for the landlord or current tenant. The reverse premium acts as an incentive for the purchaser to take on the leasehold liability.

−	The letting of commercial properties can often involve reverse premiums. Common situations can include ~~when~~ a developer ~~wants~~ a newly-built office block to be fully let at the time they come to sell it to an investment company, or ~~where~~ the developer of a shopping centre or entertainment complex ~~wants~~ to secure an ‘anchor tenant’ (a particularly well-known brand, for example) so that other tenants will be interested in taking up leases.	+	The letting of commercial properties can often involve reverse premiums. Common situations can include a developer wanting a newly-built office block to be fully let at the time they come to sell it to an investment company, or the developer of a shopping centre or entertainment complex wanting to secure an ‘anchor tenant’ (a particularly well-known brand, for example) so that other tenants will be interested in taking up leases.

−	The VAT and stamp duty land tax applicable to reverse premiums is complex and ~~often~~ it is wise to obtain professional advice as each case is usually considered on its individual facts. What must be considered is whether the receipt of the reverse premium is chargeable as a trade receipt by a tenant who is granted the lease for trade, professional or vocational purposes.	+	The VAT and stamp duty land tax applicable to reverse premiums is complex and it is wise to obtain professional advice as each case is usually considered on its individual facts. What must be considered is whether the receipt of the reverse premium is chargeable as a trade receipt by a tenant who is granted the lease for trade, professional or vocational purposes.

	If the reverse premium has been paid to enhance the value of the landlord’s interest in the property, then it will normally be deductible as being incurred expenditure. The landlord’s interest is enhanced because the rental income payable under the lease is secured.		If the reverse premium has been paid to enhance the value of the landlord’s interest in the property, then it will normally be deductible as being incurred expenditure. The landlord’s interest is enhanced because the rental income payable under the lease is secured.

Editor: Created page with "A reverse premium is a capital sum paid by a landlord or outgoing tenant to induce a new tenant to enter into a leasehold agreement. This differs from an ordinary premium whereby..."

2018-05-15T13:55:59Z

Created page with "A reverse premium is a capital sum paid by a landlord or outgoing tenant to induce a new tenant to enter into a leasehold agreement. This differs from an ordinary premium whereby..."

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A reverse premium is a capital sum paid by a landlord or outgoing tenant to induce a new tenant to enter into a leasehold agreement. This differs from an ordinary premium whereby the capital sum is paid by the purchaser of a leasehold interest to the landlord or outgoing tenant.

The reasons for a reverse premium being paid could be to do with the rent on a building being above market rates, there being something undesirable about the building, or some other reason which makes the leasehold onerous in some way for the landlord or current tenant. The reverse premium therefore acts as an incentive for the purchaser to take the leasehold liability off their hands.

The letting of commercial properties can often involve reverse premiums. Common situations can include when a developer wants a newly-built office block to be fully let at the time they come to sell it to an investment company, or where the developer of a shopping centre or entertainment complex wants to secure an ‘anchor tenant’ (a particularly well-known brand, for example) so that other tenants will be interested in taking up leases.

The VAT and stamp duty land tax applicable to reverse premiums is complex and often it is wise to obtain professional advice as each case is usually considered on its individual facts. What must be considered is whether the receipt of the reverse premium is chargeable as a trade receipt by a tenant who is granted the lease for trade, professional or vocational purposes.

If the reverse premium has been paid to enhance the value of the landlord’s interest in the property, then it will normally be deductible as being incurred expenditure. The landlord’s interest is enhanced because the rental income payable under the lease is secured.

= Find out more =

=== Related articles on Designing Buildings Wiki ===

* Assignment.
* Difference between assignment and novation.
* Insurance for building design and construction.
* Landlord.
* Leasehold.
* Legal and equitable assignment.
* Practical considerations of collateral warranties.
* Property development finance.
* Recovery of third party losses.
* Rental method of rating valuation.
* Tenant.

[[Category:Contracts_/_payment]] [[Category:Procurement]] [[Category:Property_development]]