The prospect of starting a new business, shifting operations to a new location, or even upsizing your premises as your business expands can be a daunting prospect for those who are not well versed in the logistics of renting an office in Malta. Here we will take an in-depth look at the logistics of renting an office in Malta and the process from start to finish.
Finding an office space
When starting your search for an office space, be sure of your requirements.
Take into consideration how much space you will need and the amenities your business will need. If your business is client facing, you may consider renting an office space in Malta that has a reception area or boardrooms where you can meet with your clients.
Perhaps your business requires that your staff work in shifts. In that case, you may consider a serviced office space with 24-hour security access. Or perhaps you are planning on expanding in a couple of months, so looking for an office space to rent that can accommodate your growth may be best.
Once you are clear on your business needs, seek out a registered and licenced agency that shares your vison for the future and is able to negotiate the terms of your office lease on your behalf.
Malta Sotheby’s International Realty is dedicated to assisting you in your search for an office space for rent in Malta that is best suited for your business. Our knowledgeable commercial team will guide you through the process step by step.
Putting forward an offer
Once you have found the ideal office space for rent in Malta, the next step is putting forward an offer to rent. Much like making an offer on any property, residential or commercial, as the lessee you will put forward an offer which will outline the following (keep in mind that all the elements below will usually be subject to negotiation):
• Offered amount: This is what you are happy to pay for the space. When it comes to renting an office in Malta, there is usually always some room for negotiation. However, this will be very dependent on the property and its lessor. When making an offer for lease, it is important to be realistic in terms of office space, amenities and features. A state-of-the-art building in a bustling business district is likely to cost you more than a simple lock-up-and-go office space in a less desirable location.
• Proposed lease start date: This is when you would like to legally take tenancy of the property. From the lessor’s point of view, the sooner this starts, the better; so take this into account when putting forward your offer. Seldom are lessors happy to wait extended periods for a lessee, as this means they are losing rent for each month that their property is empty.
• Proposed lease term: This is the length of the lease. In Malta you have two periods for every lease agreement:
a) ‘Di fermo’: The mandatory minimum period. Di fermo periods range from one year, all the way up to 10. The longer this period, the more attractive the prospect will be for the lessor as they know that they will have a guaranteed rent for a longer period of time. In other countries, this is sometimes referred to as the ‘break clause’.
b) ‘Di rispetto’: The optional period after the di fermo period has expired so the lessee can break their contract, without penalty, by giving X amount of months’ notice. c) Rent-free period: Depending on the current state of the property, you may ask for this period, within reason, to finish all works that need to be done until the space is operational. This can be anywhere from a few weeks up to a few months. Please note that this is not always the case, especially if the premises is operational.
d) The notice period in the ‘di rispetto’ phase: This period can range from one month up to 12. However, the norm is three to six months. For younger companies the shorter this period, the better, as you will be able to leave your contract quicker should the business not perform as forecasted.
For older, more established companies, the longer this is, the better, as it allows you to take time when switching your place of operations. From the lessor’s point of view, the longer they have to find a replacement lessee the better, so they prefer to have a notice period as long as possible.
• Any proposed works: Should the layout of the premises not be to your company’s specific needs, then you will need to make alterations.
a) All alterations to the premises need to be approved by the lessor and the lessee will need to pay for them.
b) If the property is currently in an open-plan shell, then normally the lessor will be liable for the basics: raised flooring, soffits, HVAC systems, electrical wiring, plumbing, etc.
c) However, any partitions and furnishings will usually be paid by the lessee. In these instances, the lessor may have their own architects, designers, contractors who can assist. If they do not, then it is very easy to find some or simply ask your agent for some recommendations.
d) For mid- to high-end office spaces, one can expect around €25-50/sqm for the fit-out, so this needs to be taken into consideration when forecasting costings.
e) Alternatively, there could be the option for the landlord to carry out additional works and incorporate the cost of such works in the annual rent. This will, however, need to be discussed and agreed upon upfront.
“Once you are clear on your business needs, seek out a registered and licenced agency that shares your vison for the future”
Michael J. Zammit (left) is director and joint owner, and Alexander Tadj is commercial agent at Malta Sotheby’s International Realty.Non-negotiable costings
While most elements of a lease agreement are negotiable, there will be some that are set in stone.
• Communal area maintenance (CAM): This cost is to ensure the smooth operation of the office building. This will include preventative measures such as lift maintenance, HVAC servicing, cleaning of communal areas, cleaning of façade and windows, servicing generators/electrical systems, paying for security/receptionist (if applicable) and car park maintenance, should the office be in a block with a garage. This fee is generally split between the lessees in the building relative to the space they occupy, so the larger the office, the more will be paid in CAM charges. This is usually an annual fee and paid once a year in advance. Costs can range from €10/sqm in the lower end and up to €60 for new, high-end commercial projects.
• Utilities: The cost of water, electricity and internet is to be borne by the lessee. The cost will depend on size and usage. Once ARMS has issued the bills to the lessor, the lessee will be invoiced for the amount.
• VAT: Most lessors will charge VAT on top of the monthly rent. Depending on your products or services offered, this can be offset. If, however, your service is not subject to VAT, this will be an extra cost that must be borne. VAT in Malta is 18 per cent.
• Agency fee: This is the fee paid to the agency that assisted you in finding the rental office. The fee is 10 per cent of the annual rent plus VAT, averaged across the di fermo period. For example, on a one-year di fermo contract with a rent of €5,000 per month, the annual rent is €60,000, hence the agency fee would be €6,000 plus VAT. Both lessor and lessee need to pay this fee as and when the contracts are signed.
Documentation to be supplied
As with all lease agreements, certain information and documentation need to be provided to enter into this legally binding agreement. The following documentation will need to be handed over in order for the lease agreement to be drawn up and entered into.
• Mandatory:
a) Proof of ID: Maltese ID cards or passports of the directors of the company and any shareholders with a stake of over 25 per cent in the business.
b) Registered business address: The address on the certificate of incorporation where your business is registered.
c) Business registration number.
d) Lessee questionnaire: A brief disclosure form of the company structure, its beneficial owners, operations and declarations.
• Sometimes required:
a) Certificate of incorporation: Issued by the Maltese Registrar of Companies.
b) VAT number: This will be on your VAT certificate issued by the Commissioner for Revenue.
c) Proof of primary address: Any utility bill, bank statement, government letter addressed to you and dated inside the last three months.
d) Source of funds: Very standard for owners of new companies to have to provide where the funds were initially generated. This can be from income such as salary, shareholdings, inheritance, etc. Source of funds is needed for office spaces of over €10,000 per calendar month.
After an offer has been accepted
Contracts will be looked over by legal teams on both sides. While this is not mandatory, it is always recommended that you enlist a trained professional to look over any paperwork, ensuring that both sides are fairly protected.
Your own company’s legal team can oversee this process. However, should you not have one, it is recommended that you reach out to your agent who will be able to refer you to a legal expert.
While this comes at an additional cost, the peace of mind it brings with it is priceless. This process can be time consuming if not managed correctly, as there is usually a lot of back and forth between the two parties. When one has time constraints, it is especially important to ensure that both legal teams have set deadlines they must adhere to.
Once both sides are happy with the terms set out in the agreement, it is time to sign.
When renting an office in Malta it is expected that a deposit be paid immediately upon signing. The security deposit for an office for rent in Malta can range anywhere from one to 12 months of rent. The norm is three to six months and, as with any security deposit, this will be refunded in full less any damages to the property.
Costing example
This is based on a hypothetical office with a space of 200 square metres, €5,000 per month rental amount, with a CAM of €20/sqm, with some partitions, furnishings and a quarterly payment frequency.
As evidenced above, there are many additional costs to consider when renting an office space in Malta, which is why it is important to manage your expectations and be aware of all your monetary responsibilities before committing to any commercial lease in Malta. When speaking with your agent, it is important to outline what budget you need to allocate towards renting an office in Malta.
In summary
Renting an office in Malta can be a relatively daunting task. However, with the right agent to guide you through the process, it is incredibly simple and can be exceptionally exciting.
For any questions or advice, reach out to the Malta Sotheby’s International Realty commercial team.
We understand the importance of meeting your expectations and are dedicated to assisting you in fostering your growth and reaching the goals you have set out for yourself and your company.
To view commercial properties for rent in Malta, visit www.maltasothebysrealty.com, call +356 2010 8077 or visit our office located at the Portomaso Marina.