Each month we keep an eye on key trends and words appearing across the UK press in relation to Office Space and lots of other topics.
In the last month we found that the following words have come up consistently.
agreements, application, approval, concerns, construction, developments, and permission
We thought we’d pick 3 of these and turn to our property subject matter expert Kirstin Ross with some questions related to each to get her thoughts, insights and tips.
What do you think would be the current Top 3 ‘concerns’ of social enterprise and charity organisations when thinking about property?
This is a key one for these organisations, many may be entering a rent review period and if they are it’s likely they will face increased rents. Similarly, increases have also in many cases impacted service charges, maintenance costs all creating an overall increase in terms of premises costs.
Also for those that have been on long term leases and benefited from affordable rents due to length of tenure could well find themselves priced out of the area they are currently in or indeed the market as a whole due to the increased levels mentioned above.
2. Lack of premises experience and expertise
Many social enterprises and charities core business is not related to property and this can mean that there is a lack of, or very limited, in-house experience and expertise.
Engaging with professionals to get a premises search started can be costly and include solicitors, surveyors, estate agents and more. Having experience and expertise at hand is integral to ensure the right and informed decision is made to secure a property that is likely to be vital to your service delivery. Without this experience where do you start looking? It really is worth investing the time and getting some expert advice to get this right.
3. Balancing security of tenure with long term liabilities
Signing a lease can be a positive thing as it provides security of tenure and allows you to know and plan for what budget is required for the premises element of your operations for a number of years. However, it can also mean that you’re potentially signing up to long- term financial liabilities. Think about this – what would happen if key funding was cut? What would happen when a key project completes? Make sure you limit your liability and work in the parameters of what is affordable in both the short and longer term.
A Licence agreement rather than a lease can provide flexibility that would allow you to scale the size of your office space up and down in line with funding and key projects, that way you aren’t left paying for empty space.
What would you tell social enterprises and charities to look out for in terms of property ‘agreements’?
1. Always have an agreement
Don’t occupy space without an agreement. With this it will be clear what obligations, responsibilities and liabilities are for both you and other parties involved. Without an agreement you may have financial and operational challenges eg: getting agreement on financing & scheduling repairs or when and if you need to move out.
I’ve seen many circumstances where VCSE organisations have been impacted by being in a property, sometimes for several years, without an agreement; this is extremely risky and should be avoided.
2. Negotiate your lease and mitigate and clarify costs
When you are reviewing the lease ensure that everything is clear and you mitigate cost risk where possible. Think about things such as; Is there a rent free period? Can you agree a cap on inflation of both service charges and rent? Can you limit or minimize maintenance and dilapidation liabilities? This is all about making things clear so that there are no unexpected expenses that could jeopardize your operations and ultimately your organisation.
3. Be clear on what you have access to
Many properties have shared areas or facilities so be sure that you know exactly what you do have access to and at what level e.g. common areas, toilets, lift facilities, parking entitlements, communications room etc. Always make sure you get a copy of the current floor plan and drawings as part of your lease so that it is clear what your demise and rights of access are.
4. Up to date & formally agreed schedule of condition
Ensure that you obtain this as part of your lease process so that the current state of the property when you take occupation is clearly documented to avoid any question or confusion about repair and dilapidation liabilities in the future.
5. Undertake a survey
Undertaking this will help inform potential negotiations with the landlord if any building or plant works are required. It will also avoid any future nasty surprises in terms of maintenance liabilities or repair costs. Always ensure you know exactly what the service charge includes and excludes and any other exceptional building charges that you may be expected to pay a proportion of.
When social enterprise and charities are looking for new property is there any key permissions they should be aware of/asking landlords about?
Permissions vary being property or lease specific and will be included within your lease/agreement, however, here are some permissions to look out for:
- Make sure the category of property use is correct for the activities you are looking to undertake. E.g. B1 relates to business space so ensure it is registered appropriately before you proceed.
- Are there any landlord restrictions? E.g. do you have to get approval before undertaking refurbishment work, installing partitioning etc.
- If you are looking at acquisition of property make sure your solicitor investigates the associated permissions relating to all parties E.g the developer, the owner, the local authority, such as permissions relating to the external element of the building E.g. are there any restrictions on design, access or signage?
Check your lease agreement & all associated referenced documents to be aware of any restrictions and permissions required and consider how these might impact on any refurbishment work schedules and/or your intended use of the space/building.