Renting out a property to generate recurring revenue or income is, hands-down, one of the safest investment options. However, renting a commercial property in Pakistan is a slightly different ballgame than giving away residential units to tenants. There are specific terms to understand and ways to decrease risks, owing to the difference between both leases. Hence, we’ve pulled together all the important things and drafted this handy guide to help you understand the importance of this process and navigate through it smoothly.
Renting Commercial Property in Pakistan – A Guide for Landlords
We have already shared a step-by-step guide on renting out a house to generate extra income. However, this blog is specifically focused on the worried landlords who have a lot of questions on how to go about using their commercial land for rental income. Now, don’t you worry because from finding the right person to trust your property with to asking the key questions from potential tenants, we’ve got you covered! Here’s all the information landlords need to have before renting commercial property in Pakistan:
- Understanding the Different Types of Commercial Leases
- Finding a Trustworthy Tenant
- Negotiating a Fair Deal
- Carrying out Legal Procedures
- Avoid Being a Nosy Landlord
Understanding the Different Types of Commercial Leases
Lease or rental agreements are a type of long-term investment that are quite popular in Pakistan’s property market. However, as much as landlords know about earning a profit out of it, they’re less aware of what goes behind the making of such contracts and what best suits their situation. To understand the rental procedures better, let’s get to know the general types of tenancy leases for commercial properties:
- Net Lease: Under this type of lease, tenants only pay the rent amount for the utilities they use and the property tax, while landlords are responsible for the maintenance and for paying property insurance premiums.
- Double Net Lease: Landlords are obliged to cover all the expenses under the head of maintenance and repairs, while tenants are responsible for paying utility bills, property taxes, and insurance premiums, including rent charges.
- Triple Net Lease: Everything remains the same, except the landlord is responsible for covering the cost of structural repairs.
- Modified Net Lease: This type of tenancy agreement enables landlords and tenants to split all the expense heads and create any modifications with mutual understanding.
An ordinary tenancy agreement typically lasts from one to five years in Pakistan. However, if it sounds too much of a commitment, a landlord and a tenant can mutually agree to break the agreement whenever they want. A landlord is then free to find another tenant, while the tenant is free to relocate to some other premises.
Finding a Trustworthy Tenant
As soon as you’ve comprehended the types of tenancy agreements, the second-most critical step in renting out a commercial property in Pakistan is finding a suitable and trustworthy tenant. One of the most popular ways of finding a tenant is by visiting a local estate agent, which is a good option if you are already familiar with the ways of the property market. If not, finding the right tenant can be extremely daunting, time-consuming, and expensive, too. Also, we cannot omit to mention the times when landowners end-up renting their commercial property to undeserving tenants.
In such cases, coordinating with a proficient agent can save you a lot of hurdles and alleviate the burden of dealing with multiple potential tenants at the same time. That is where Zameen.com steps in and makes the procedure of property hunt for both tenants and landlords much simpler and convenient. The perks of working us are many, and one of the many worth-mentioning benefits is that our registered members face less fuss and get more offers without even hitting the road.
Another major plus of working with us is that since most of our agents are registered, the cases of things going wrong are rare-to-none. Not to mention that landlords and tenants can easily sign-up on our website without having to pay anything in return.
Negotiating a Fair Deal
The best way to build better relations with your tenants is to pre-decide on certain terms and conditions. For instance, you don’t want a pet on your property? Let them know beforehand and mention it as a key term in your tenancy agreement. You can even restrict tenants from remodelling or altering the structure of your commercial property or allow construction in particular zones or areas only. Some other major conditions in a commercial lease include a termination clause, lock-in period, and rent increment policies and period.
Moreover, there are many reasons for property disputes, and one of the most common situations is having little-to-no communication between a tenant and a landlord. To avoid such scenarios, make sure that while negotiating a deal, both parties should be aware of and agree on the answers of the following questions:
- What will be the amount of initial/monthly rent?
- What will be the security deposit?
- What will be the rent renewal policies?
- When will the tenant be notified about rent renewal?
- Who will pay for maintenance & repairs?
- When will the tenant be notified for rent expiration date?
- Will there be any deductions from the security deposit if the tenant breaks the lease?
Carrying out Legal Procedures
Besides enjoying a monthly income and letting other people use your property for commercial uses against it, renting out is a baggage on a landlord’s shoulders. The set of responsibilities they have towards their tenants and the government are reinforced by the provincial law to prevent misuse and exploitation. These regulations are mostly enforced to create a higher safety net around the property that is being used by other occupants or tenants.
So, don’t let the word “legal procedures” discourage you from renting out your land for commercial use in Pakistan since rental agreements are quite easy to comprehend if you know the right person to do the job for you.
One of the major mistakes made by landlords while renting out their property for commercial use in Pakistan is that matters are not settled in the court of law, and the agreements aren’t registered in the local registrar’s office. According to the Rent Control Act of Pakistan, the government doesn’t entertain any commercial lease and tenancy agreement, which isn’t legally carried out. Right after you’ve found a trustful tenant and the deed is drafted, don’t forget to register the commercial lease with the concerned authority by paying stamp duty and registration cost. In general scenarios, the costs are borne by the tenant, but there’s no such rule – landlords and tenants can divide the fee as per their mutual understanding.
Avoid Being a Nosy Landlord
Successful landlord-tenant relationships are usually built upon trust and taking consideration of the tenant’s privacy. There’s no doubt that landlords reserve complete right to visit the property and conduct timely inspections, but there are certain limitations placed upon property inspection. Landlords have to make sure that the inspection isn’t falling anywhere near intrusion or invasion of the tenant’s privacy. Failing to do so might result in a landlord having to face legal consequences. The minimum time of announcing a property inspection should be 24 hours in advance and in the presence of the registered tenant.
This was our take on giving you the best advice on renting out properties for commercial use in Pakistan. However, the duties and the work doesn’t end here for a landlord, in fact, this guide only paints a small picture of the bigger responsibilities. Landlords have to manage several things afterwards, including monthly rent collection, dealing with occasional maintenance and repairs, maintaining a record of income, regulating property, and conducting a timely inspection.
Have you ever given your property on rent for commercial use? Share your experience with us at blog@zameen.com. If you would like some more tips on renting and selling, keeping visiting Zameen Blog – Pakistan’s #1 property portal. Show us your support and love by liking our Facebook page and subscribing to our newsletter.
