Picking the Perfect Premises

By at home

Whatever your business you’ll need a base, plus someone to advise you about all the legal implications of a business premises.

Here’s our guide to how to go about it
So you have been given the green light to start your business – what next? Most firms need a place they can call home, be it the factory, the shop or the office. This is the building that says you exist as a viable concern.

But finding the right space for your business may not be as straightforward and painless as you imagine because there is so much that needs to be considered. Think about the location and available transport links and then ask yourself questions about the standard of facilities you require.

It is a competitive market and there is a wide choice available as landlords battle for your custom. So with so many incentives being offered, what do you do?

Simple. Return to the business plan and your projections for the future. Decide from your projected growth the amount of money you want to spend on your move. This will give you guidance on the services you want the landlord to provide and help with the decision over the length of the lease.

Don’t forget to build into your budget one-off costs for items such as furniture, decoration and IT equipment, as well as ongoing costs like rates and service charges. Armed with that knowledge, you can start your search by calling commercial agents, doing online searches, reading local newspapers and even walking the streets to see first hand what is available.

Once you have found a property that looks as if it will fit the bill – whether it is leased or freehold – be practical and don’t be swept away by dreams. Be tough, be sensible, ask questions and negotiate. Talk to other tenants of the landlord, and ask for a copy of their ‘customer service charter’, because you need to know how responsive the landlord will be if anything goes wrong.

If you’ve done your homework and you feel confident that you’re getting a fair deal then you should move to secure the space.

The Advantages of a Business Centre
An increasingly popular option for those not in direct retail is to take space in a business park or centre. Such is their popularity that it is estimated that business centres in the UK will operate more than 300,000 workstations by the year 2006.

The modern-day business centre provides a total-occupancy solution that should have considerable appeal to small firms. Not only do business centres provide fully equipped offices, ‘hot desks’ and meeting rooms, they also offer a wide range of secretarial and support services.

Business centres are an attractive proposition because there are no capital investments required to buy or lease office equipment or furniture. Business centres offer the customer immediate access to fully furnished and well-equipped workspace in city centres and in key business districts across the country.

This allows the user to concentrate their time and resources on their core business from day one, while reducing their financial risk to the minimum rental period, which is usually three months’ rent.

Costs for taking space at a business centre vary considerably depending on the location of the centre, ie city centre or out of town business park; the size of the office required and its physical location within the centre; and the quality of the building and its décor. Costs are transparent and inclusive of all building, heating and lighting, reception, security, maintenance, redecoration, refurbishment and cleaning charges.

It is estimated that business centres in the UK will operate more than 300,000 workstations by
the year 2006

There have been a number of major surveys in recent years drawing cost comparisons between taking workspace on a conventional lease versus serviced office space in a business centre and there are savings to be made – in some cases up to 50 per cent.

Taking this a stage further is the virtual office – which is no office at all but a manned telephone and a postal address that can be used by your business.

If you are opening a shop, then you have to be in a place that attracts custom. Here research is vital. Know the habits of the passing trade and remember that the more you pay the better your position.

Renting versus Buying
The really big question is whether to buy or rent your business property. If you buy, you own an asset that will potentially increase in value; your mortgage is likely to be cheaper than rent; you have more control over your budget and therefore more security because you won’t be exposed to any hefty rent increases.

If you take out a fixed-rate commercial mortgage, you’ll be able to set budgets knowing exactly how much you’ll be spending on the premises each month. And if you don’t use all of the premises you can sub-let part of the building and recoup some of your outgoings. Lastly, interest payments on a commercial mortgage are tax-deductible.

The drawbacks are these: first and foremost it costs a lot to buy and unlike renting, you’ll need to come up with a considerable deposit. Not only that but it is far harder to relocate your business. Extricating yourself from a rental agreement is much easier than selling premises or finding a new tenant to take them over.

Selling a commercial property is best done through agents who specialise in the field simply because they are more than likely to have a list of potential clients and will know the market. Conversely, if you are renting it may be possible to negotiate a sale. Just

like your home, there will be tax to be paid on the property in the shape of business rates. These are charged on a valuation carried out by the District Valuer. You can appeal against the rateable value within six months of occupying the premises or if changes are made to the building. If you want to appeal you may need expert professional advice from a Chartered Surveyor.

Contact the Royal Institute of Chartered Surveyors on 020 7222 7000 for a local firm who will give you a free half-hour interview on rating valuation.

Remember, however, you are still liable for the full rates until the appeal is decided. If you stop trading you should tell your local council immediately. You may still be responsible for paying business rates if you are still leasing premises even if they are empty.

There are no rates charged on empty factories, workshops and warehouses. Empty shops and offices do not have to pay for three months and 50 per cent of the charge is payable after that. The Council has the power to write off all or part of your business rate arrears. They have to agree you would suffer hardship otherwise.

There are other expenses – like water and drainage. Rateable values are often used as the basis of the water bill. Charges for unmetered business properties and Property Drainage and Roads Drainage charges for metered business properties are charged as a proportion of the Rateable Value (RV) of the property.

The role of the lawyer
Helping you through all the above should be a solicitor who is well versed in dealing in other business matters, such as your company structure: should you trade in your own name or through a company, for instance? Your solicitor will be able to explain the merits of both and help you decide on the best option.

As far as the business premises are concerned, he will make sure you understand all the implications of the terms of your lease and when and how rent or service charges should be increased. He will also explain the restrictions of running your business from home.

Small business owners are often reluctant to approach a solicitor, fearing a large bill arriving on the doorstep. However, as with most aspects of running a business, waiting for the arrival of crisis before seeking legal advice will usually prove to be a false economy.

The key is to choose the right lawyer and then make sure the professional advice given identifies potential pitfalls and avoids problems before they surface. The best way to find the right man or woman for the job is through recommendation.

The role of your solicitor is multi-layered. He can help with disputes, for example. Do you know where you stand legally if you fall out with your fellow shareholders or business partner? What happens to your share of the business if you are taken ill or die? Are the profits and responsibilities associated with the business being divided fairly? He will also be useful when it comes to your obligations to full-time, part-time and contract staff.

A solicitor can help you write working contracts and inform you of your rights if you feel you need to get shed staff. With the right advice and the right research, you should be able to create a real base for your business dreams to become a reality.

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