1. Acquisitions – Businesses must not assume their perfect property is on the market immediately!!!
In the absence of any real speculative development over the past 7 years, there is now a real shortage of supply in many sectors (retail being an exception but many of these are significantly over rented now). Sufficient time must therefore be allowed to search the market carefully. Typically, we advise our clients to start thinking about their move between 1 and 2 years in advance of any relocation, the first phase providing for creating the vision (why, where, what (size/tenure) and how), up to 9 months (and often longer) to identify and agree suitable terms, 3 to 6 months to secure the premises (is planning required/does the building need refurbishing and fitting out?) and then the costly, time consuming and emotional period centred on the move as well. Critically, at the outset, judge precisely how much space the business actually needs. A detailed space planning exercise will drive the size of building and with rents say at £10 per sq.ft, you will see how money can be made, and lost!! Equally, at the outset, factor in the costs not only of the move but most critically, the exit strategy from your present position- leases have stringent repair liabilities around dilapidations and we often find businesses do not fully quantify the likely settlement costs for these and make an adequate provision in their accounts.
2. Get the Right Professional Advice before Entering the Market
When selling or letting commercial property it is critical to ensure that you are entering the market at the correct asking price / rent – i.e. if the price is too low, you are at risk of not achieving the full value of the property and conversely, if the price / rent is set too high you risk putting off potential interest. In addition to advice regarding the price, it is crucial that you implement a structured marketing campaign to ensure that the available property is fully exposed to your target audience, as an example:
- Does the property present correctly?
- Is the necessary information displayed?
- What are the key selling points of the property and/or its location?
- How would a business or occupier value or rely on this?
- Should you erect a marketing board and if so, what should it say?
There are many factors that an experienced professional would consider when acting on your behalf – the above is just a brief selection. For competent and full advice, contact us.
3. Service Charge – don’t push Tenants to the limit
Some leases will allow Landlords to recover cost of works on common areas from tenants via a Service Charge. We have found it very important to balance the need for work with the cash flow of tenants. In short, we identified that working with tenants to establish a strategy for works over a longer period of time helps to control their expenditure during this tight economic climate. This helps tenants to budget and removes the surprise of large service charge invoices, which could either be disputed or be unpaid. Arrears could build up and the Landlord could end up with a vacant property and the costs that come with it. The investment income being replaced with property expenditure!
4. Rates mitigation
In ‘Makro Properties Ltd v Nuneaton and Bedworth Borough Council [2012] EWHC 2250’,the High Court held that the temporary storage of documents that occupied only 0.2% of a warehouse’s floor space was actual occupation for the purpose of business rates liability. The result of this meant that a brand new period of empty rates relief could be applied when that occupation ended. There has to be an intention to actually occupy the premises together with use of the premises, however slight. This use must also be of practical benefit to the occupier and the possession must be exclusive.
5. Business Rate appeals
Effective management of Business Rates can identify significant savings. Rates are based upon the Valuation Office’s interpretation of the rent of the property, so can of course be questioned. If excessive rates are found an appeal can be made, with the intention of gaining a refund on past payments and reducing the rates charged. We have also had success where uses have changed but not been updated by the Valuation Office, for example an outgoing tenants use of a property was rated higher than that of the accommodation available following them vacating. We therefore made an appeal on our client’s behalf that resulted in a refund and reduction in their liability going forward.
6. Dilapidations
Dilapidations affect nearly every type of commercial building and occur at the end of a lease or when a break clause is exercised. Most Tenants feel overwhelmed by a Schedule of Dilapidations, which is a lengthy, highly detailed legal document. You should assess any likely liabilities as early as possible and at least a year, and preferably 2 years, before expiry or a break. An experienced surveyor can prepare a Dilapidations Liability Assessment on the property. This allows for forward planning to mitigate any costs and to prepare for this cash flow liability. If you are looking at projects or alterations you may want to do to your property, using an experienced surveyor to look at and assess the feasibility of the proposal can make the difference between success and failure. By getting early advice, the most effective solution for your business can be achieved before committing to substantial costs. Basically, the emphasis should be on the value of getting early advice from a surveyor and by doing so it can save you money!
7. Commercial Property Transactions
When entering into a Leasehold or Freehold agreement it is important to have a clear and concise knowledge of both the market and transaction processes. Initial inception of a deal or transaction being agreed is that of the Heads of Terms. Their main aim is to clearly stipulate key points of agreement, which if completed correctly and fully will lead to a successful completion. Without this, issues and stumbling blocks can occur and in the very worst case could unsettle both parties and lead to an abortive transaction if too many grey areas have been identified. Once Heads of Terms have been agreed it is then important to ensure that the solicitors instructed will be regularly contacted to progress the transaction speedily. In many instances having a retained agent often can lead to a better structured, more attractive and efficient transaction…
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Ewan was elected a Member of the RICS in 1986 and a Fellow in 2000. He joined Whybrow in 1987, and was a founder director of Whybrow Riches & Dodds, now Whybrow Chartered Surveyors & Property Consultants.
Email: [email protected] Telephone: 01206 577667