The right property for your business
Finding premises that work.
If you're not working from home then finding a property at the right price can prove a key factor in your success. We’ll take you through the whole process of finding a property that fits your business, from location to buying versus leasing and the legal essentials.
Pulling together a list of all the facilities you’ll need at the property before you start looking will save time and money.
- Does your property need to be easily accessible for customers and/or suppliers?
- Will noise or pollution from your business be an issue?
- If there are competitors close by will this help bring in customers or make things more difficult?
- How much parking do you need?
- Do you need meeting rooms and reception areas? How about storage, e.g. warehouse space?
- If you’re looking at a business park, are some shared facilities available?
- Is there a good enough supply of gas, water, electricity and drainage?
There are several different ways of looking for premises:
- estate/commercial property agents
- chartered surveyors
- property listings online and in newspapers
- vacant properties and managed workshop units on local authority registers
- industrial estates and business parks in your area
- property consultants – they can help source potential properties for you.
Sign up with several of these to make sure you get a good supply of property information. They’ll send you details of properties that become available and may send out property newsletters that can give you an idea of the market.
Commercial agents and chartered surveyors can also help negotiate your property contract terms. Surveyors can give you valuable advice on property values and structural matters too.
You’ll usually find commercial properties that you can either buy (freehold) or rent (leasehold). Here are some of the pros and cons of both options.
- The building is yours to use as you see fit within the law.
- As a start-up business it may not be easy to get a commercial mortgage – you could have to find a substantial deposit to secure one.
- You’ll need to make enough profit to keep up your repayments, even if interest rates rise, so it can be a financial risk.
- Requires minimal capital outlay at the start.
- A smaller financial risk than freehold.
- A lease is commonly renewable so you can usually stay on (unless you breach your contract or the landlord wants to take back the building).
- There will be limitations on making alterations or to sub-letting any spare space.
- Negotiating your lease can be complicated.
- There can be penalties and contingency charges as part of a lease that can use up your capital when you may need it most.
Getting the right price
- Commercial property is usually priced per square foot, so work out what room you’ll need and use that to set a budget figure.
- As well as the lease or freehold costs, you’ll need to add on costs for moving and setting-up, such as refurbishment and new equipment.
Once you’ve found a potential property, you’ll need to have a complete structural survey carried out on the building and any work required. The Royal Institution of Chartered Surveyors can provide a list of surveyors in your area.
Other things to check:
- Does the property have planning permission?
- What’s the property grading – is it possible to agree a change of use if needed? (If renovations are necessary, speak to the local town-planning officer about them).
- Is there any history of subsidence or damp?
- Has the area been prone to flooding in the past?
- Does the building comply with health and safety and planning regulations? You, and your landlord if you have one, will be responsible for making sure the premises are fit for business.
If you’re leasing a property, ask a solicitor to guide you through the small print of the contract. You should find out:
- how long the lease is for and who owns it
- the terms of any break clause, allowing you or the landlord to terminate a tenancy before the end of the lease;
- the name of the person responsible for repairs and renewals;
- the frequency of rent reviews and possibilities for a rent ‘cap’;
- how much the service charges will be;
- if you’ll need to give a personal guarantee;
- whether you can reassign the lease if your business needs change;
- any limiting or unfair terms.
Also speak to your solicitor or surveyor about suitable break clauses and the right to sub-let.
You should check for other costs including security, cleaning, maintenance charges, local council business rates and insurance. These may all be included in a service charge.
The current tenant may be able to give you details about service charges and whether the landlord provides a good service. Service charges can have a big impact on your business finances, so find out if there are plans to work on the building in the near future. Speak to your solicitor or surveyor about negotiating a cap on your service charge liability.
Health and safety
Your survey should assess whether the premises comply with health and safety and planning regulations.
If you fail to meet the regulations you could receive a substantial fine or have your business closed down. Regulations cover premises and working conditions – including machinery safety, noise and fire procedures – as well as special rules for your industry.
Ask your trade association or industry lobby group for advice, and visit www.hse.gov.uk for guidelines on specific working practices. You’ll find a full list of trade associations at www.taforum.org. You can also ask for advice on health and safety matters from a solicitor or your local fire safety officer.
If you employ people in an office or shop, you’ll need to register with your local council – normally the Environmental Health department. If you’re going to be manufacturing, you must register your factory with the Health and Safety Executive.
You can get advice on disabled access to your premises from the Equality and Human Rights Commission at www.equalityhumanrights.com. They also offer advice and guidance on all aspects of human rights applicable to businesses – from the minimum wage to hours of work.
The law requires that you take out some or all of the following insurances to safeguard your business:
- Employer’s Liability Compulsory insurance – protects you against claims from employees for injury or disease resulting from their employment.
- Insurance for your premises and equipment – if you lease business premises it will probably be your landlord’s responsibility to insure the building, and it may be in your lease that you will be suspended if, for some reason, you are prevented from using the property.
- Public Liability insurance – protects you against claims from members of the public for injury sustained on your premises or as a result of your or an employee’s activities. Find out more about how our Business Insurance Services can help.