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As you change (either growing or shrinking or looking to cover new areas) you will probably need to take a lease of new office space. The costs of moving are high, the time and stress are enormous. These are our Top Tips (some legal, some practical) for you to consider in any office move.


  1. Use a Property Agent - You should use a specialist property agent who acts for YOU (not the landlord) to both find the right premises for you and to negotiate the best terms for you. You will pay for this but it will save money. Much office space is only available “off market” – you will not know about it, a good agent will. Similarly a good agent will know what the market rent REALLY is and what concessions/inducements landlords will give you. You will not know this and (to be blunt) you risk being ripped off in any lease negotiation if no agent is watching your back.

  2. Do Not Get Tied into a Long Lease - You are in a state of change. Hopefully you will grow. Being realistic there is also a chance you might shrink. Either way you can easily find your premises becoming too big or too small. So do not tie yourself into too long a lease. The industry standard is a 5 year lease with a tenant break at year 3. Only you know if that is flexible enough for you. If you want more flexibility ask for a rolling break or a break exercisable on every anniversary of your lease. Landlords are likely to be prepared to negotiate and if you do not ask you will not get !

  3. Rent Deposits and Guarantors – Limited your Exposure -Unless you are generating net annual profits in excess of three times the annual rent the landlord is likely to ask for either a rent deposit or a personal guarantee.

    Rent Deposits – typically are for an amount of 6 months rent plus VAT. Do not blindly accept this. Many landlords will accept a deposit of 3 months rent and many will drop a demand for an amount equivalent to the VAT the rent deposit. You should also push for the landlord to return the rent deposit once the profits meet the profit test (not after 3 years consecutive accounts are produced showing that level of profits).

    Sometimes landlords will accept a personal guarantee rather than a rent deposit. Again push for the personal guarantee to be limited to a set amount (start with a sum equal to 3 months rent) and also for it to fall away when the profit test is met by your company.

  4. Check the Connectivity of your Building - For most tenants it is crucial the premises has sufficient connectivity to enable your I.T. and internet to function. As soon as you see a property you like make sure you find out its connectivity and also make sure your I.T. consultant is given access to the premises to measure it independently. If this connectivity is insufficient for your business you need to find alternative premises!

  5. Does your I.T. need Fibre-Optic Cabling? -Many insurance brokers have I.T. which need fibre-optic cabling to work efficiently. Such cabling will be installed by your telephone service provider (Colt/BT etc.). As the fibre-optic cabling will run from your premises to the ground floor/basement the landlord will grant a wayleave giving you and your service provider the right to run the cabling over the building.

    Before a wayleave can be granted the telephone service provider will need to inspect the building and prepare plans showing the run of the cabling over the building. These will need to be approved by the landlord and incorporated into a wayleave agreement which the landlord will prepare.

    If you leave this issue until AFTER you have completed your lease it will take four to six weeks to get the wayleave in place AND the landlord will charge you its professional costs for granting the wayleave.

    INSTEADwhen negotiating your lease with the landlord agree that the landlord will grant a wayleave and it will bear its own costs. At the same time make arrangements for your telephone services provider to access the building and start preparing the necessary plans. This will enable you to be running efficiently as soon as possible after completing the lease at minimum cost.

  6. Arranging your Fit-Out -If you are taking a new lease of empty premises you will need to fit-out your space. Costs of fit-out vary enormously so here it is crucial to get at least two fit-out companies quoting. Remember that you will have to remove your strip-out at the end of your lease. So the more lavish your fit-out at the start the more costly it will be to remove it at the end of the lease.

    Remember you can minimise the cost of the fit-out if you take an assignment of a lease from a current tenant who has already fitted out. Also in that case you may be able to buy the outgoing tenants furniture which can minimise your costs further.

  7. Unexpected Costs –Stamp Duty Land Tax and VAT - If the rent and term of your lease is over a specific level you will be liable for Stamp Duty Land Tax. This is a cost which is often forgotten about but can be substantial. For a five year lease with VAT payable and no rent free you will start paying Stamp Duty Land Tax at an annual rent of £28,000. For a five year lease at an annual rent of £100,000 the SDLT (assuming VAT is payable) will be £3,918.00.

  8. Consider Hot Desking -You are (hopefully) moving into new premises because you are expanding. If you do not operate a hot-desking system think about it. Property costs are a heavy burden. Advances in I.T. mean your staff can often operate effectively at home/elsewhere. If you move to a hot-desking solution you can reduce your floor area needed per employee. Not every employee needs a dedicated desk/office.

    Furthermore some people (especially your business getters and rainmakers) should not be in the office full-time. They should be out in the market seeing people!

Conclusion

Moving into new offices is a complex exercise. Numerous issues and problems need to be thought about many months and even years before your move.

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