After wages, your premises are likely to be the second largest cost to your business. But how seriously do you take them?
Do you know if you are maximising the value of your premises to your business? Do you appreciate the cyclical nature of dealing with your premises? Are you aware of all the opportunities (and pitfalls) associated with your business rates, tax issues, the space you occupy and - if you are a tenant - your lease? Are your premises on your agenda?
If you want to get serious about your business premises, the best place to start is with a Chartered Surveyor. Whether you wish to make the most of your existing premises, are looking for new premises, considering moving, or wish to find ways of tailoring your premises to your business needs, a local Chartered Surveyor, backed by the real peace of mind that RICS membership brings, is just a phone call away.
Maximising the value of your business premises to your business
A Chartered Surveyor can contribute significantly to the success of your business. Property issues are ongoing and cyclical in nature, so building a relationship with a Chartered Surveyor - who can develop a tailor-made strategy for your premises to deal with today and tomorrow - can be as valuable as the relationships you enjoy with other professionals, such as solicitors and accountants.
An RICS Chartered Surveyor will:
- Save you money
- Save you time
- Take responsibility
- Add value
- Provide real peace of mind.
They can make the most of your premises by:
- Negotiating your rent review
- Managing your lease renewal
- Assessing your service charges
- Sorting out your business rates
- Considering your tax position
- Arranging your insurance.
They can tailor your premises to your needs by:
- Making the best use of your space
- Project managing change
- Dealing with planning issues.
They can find the right premises for you by:
- Matching your needs to new premises
- Assessing and valuing new premises
- Advising on acquiring your premises.
They can help in moving on from your premises by:
- Disposing of your premises
- Dealing with your landlord.
Negotiating your rent review
If you are leasing premises you will probably have regular rent reviews written into your lease. Some reviews can only be upward, others can be up or down. All leases are different, but the main aim is to adjust your rent to the current market level.
There is normally a specific procedure to be followed, beginning with your landlord writing to you, giving notice of your review date and quoting a revised rental figure.
A Chartered Surveyor can take on your rent review, assessing whether your landlord's proposal is fair, responding appropriately, entering into negotiations and, if necessary, going to mediation or arbitration on your behalf.
Renewing your lease
A time for major decisions. If you would like to stay in your premises and renew your lease, you should usually be able to.
Your landlord will not normally be able to move you out unless they can show you aren't occupying the premises, you aren't following legal procedures, you have breached the terms of your lease, or he wishes to develop or occupy the premises himself.
At the same time, you will wish to get the lease renewed on the best possible terms.
A Chartered Surveyor can manage this process, make all the necessary applications and, if required, go to arbitration to ensure you achieve the best possible agreement and that your rights are preserved.
In Scotland landlords and tenants are obliged to give at least 40 days notice prior to the lease termination date. If this is not given, the lease will automatically renew for the minimum term of the existing lease or 1 year - whichever is shorter. This process is known as 'Tacit Relocation'. A Chartered Surveyor can help to guide you through this process and offer you the best advice for your business.
Assessing your service charges
As a tenant you will normally have a service charge to pay to your landlord covering the upkeep of common parts of your building and shared services eg. cleaning or insurance if your landlord is responsible for these.
An estimated charge is typically payable at the beginning of a year with a resolution resulting in a further payment or rebate at the year-end.
A Chartered Surveyor can assess the fairness of the charge, ensure you receive what you are paying for, including the quality of provision, and that the year-end resolution is dealt with fairly.
However, it is important to work with a Chartered Surveyor when negotiating your lease to ensure the provisions are fair and reasonable.
Sorting out your business rates
Assessing your business rates, deciding whether you have a case for appealing against them, then making an appeal to give you the best possible chance of success, is complicated, yet it could save your business thousands of pounds.
Talk to a Chartered Surveyor. They understand how the rating system works and are the best qualified professionals to advise you. They can explain how your rates bill was assessed and tell you if you qualify for any exemptions, transitional relief, vacant premises or sub-letting reductions.
If they establish the grounds for an appeal they will make it in the most efficient manner. Appeals can take months or even years, and with the amounts of money involved it is vital to have an expert on your side. They may be able to fast track the process and will aim to get your appeal settled by agreement rather than the lengthier tribunal process.
RICS Business Rates Helpline
RICS offers every business a free half hour of business rates advice on 0870 333 1600
In the UK, business premises are costing tenants and owner-occupiers c. £300 million in over-charged business rates
Considering your tax position
There is no point in paying more tax than you have to.
Property related spending may be allowable against your profits for tax. But this depends on the classification of the expenditure - a highly complex area where you need the specialist advice of your Chartered Surveyor at the earliest possible stage.
A Chartered Surveyor will be able to maximise your tax allowances. They can help you plan ahead to optimise your position and potentially make retrospective claims on your past spending - so could provide significant funds immediately.
They will also be able to identify whether you qualify for other tax saving opportunities in regard to VAT, Stamp Duty and Land Remediation Tax Relief.
Arranging your insurance
If you own your premises or are responsible for your own insurance in leased premises, a Chartered Surveyor can value your building and its contents, assess your need for disruption cover and, if required, seek quotes and arrange all your insurance.
If you are unfortunate enough to have to make a claim, they will organise and manage any emergency works and subsequently negotiate your claim in full with your insurers.
Making the best of your space
Businesses may decide to move because they believe their current premises are either too big or too small, without fully understanding whether this is the case, and if so, what the alternatives to moving are.
A Chartered Surveyor can prepare a brief detailing your business needs and undertake an audit of your premises to understand how suitable they are.
They may discover your premises are too big, and if so, propose a way you could section off and sub-let part of your premises; and as a consequence, reduce your business rates and tap into a valuable new revenue stream.
They may find that whilst your space may appear too small, if you introduce new working practices - open plan, hot desking - make minor internal alterations or reconsider your office furniture, the problem may disappear. If such relatively cosmetic changes are not sufficient they may propose extending your premises.
They will take your future plans into account and ensure that your space can adapt to them. If you lease your premises they will ensure that anything they propose will not contravene the terms of your lease or seek permissions from your landlord whereÊnecessary.
Project managing change
It is easy to underestimate how much time managing relatively small alterations to your premises can take. The person with the right skills to take on the job - and allow you to concentrate on your business - is a Chartered Surveyor.
They will undertake any size of project - including time, money and quality management - from initial planning and design, through seeking necessary planning permissions and building warrants in Scotland, preparing and issuing tender documents, appointing contractors, managing the execution of the works and carrying out a post-completion inspection to ensure that the job has been done to specification.
Dealing with planning issues
Most external structural developments require planning permission, including, in many instances, walls and fences and occasionally, internal works. Dealing with planning is typically an involved, complex and lengthy process.
Chartered Surveyors understand both planning law and the way planning works. In Scotland Chartered Surveyors understand the building warrant application process. So using a Chartered Surveyor to deal with it will not only give your planning application the best chance of success but also minimise the time you need to be involved.
Obtaining permission can be a long, drawn out process, so it is important to get on with it in the early stages of any project. Your Chartered Surveyor will probably seek informal discussions with your Local Planning Authority to discover whether permission is likely to be granted and what issues are likely to arise. They will move to deal with these issues prior to making an outline planning application followed by a full planning application.
In Scotland you will need a Building Warrant before work can begin. Your Chartered surveyor will also be able to advise and assist with this process. If timescales are tight this is often arranged as soon as possible following the submission of your planning application.
If, despite best efforts, permission is refused, your Chartered Surveyor understands the appeals process and in the first instance will aim to overcome objections through discussion and negotiation. If this is not achievable they will advise you on the likelihood of an appeal succeeding and will make any appeal you decide to go ahead with, on your behalf.
Matching your needs to your premises
Seeking new business premises is a time consuming, lengthy and involved task.
To avoid distracting you from running your business and get the best possible outcome, get a Chartered Surveyor to do it.
They will create a brief that will ensure you consider all relevant issues eg. location, the nature of your business, your staff requirements, ways of working, power requirements, expansion plans etc. before searching amongst their own contacts, estate agents, economic development units and any other channels available to them in your area.
In sourcing premises they will deal with such issues as:
- Planning - that there are no restrictions or that a permission for your use is likely to be accepted
- Mains services - that these are adequate for your business
- Health and safety, fire regulations and disabled requirements - that your potential premises are compliant.
Assessing and valuing new premises
Once you have premises that you are interested in, your Chartered Surveyor will survey the building and produce a "schedule of condition' which, as with a domestic property, will lead to a valuation of the premises to form the basis of negotiations to buy or lease.
You may think this is not quite as important if you are considering leasing rather than buying the premises, but the schedule is vital as a record of the premises at the start of a lease period, so that at the end of your lease your landlord cannot ask you to fund or carry out repairs that were already issues prior to your leasing theÊpremises.
Your Chartered Surveyor will agree with you the scope of the survey. In addition to the fabric of the building, they will want to know whether such issues as heating, electrics, disability compliance and right to light are to be covered. They will provide a report which deals specifically with each element in turn, as well as raising issues of concern for possible further investigation.
Advising in aquiring your premises
A Chartered Surveyor can help you decide whether buying, leasing or taking out a licence on your business premises is the most appropriate way for you to acquire them. Subsequently they can manage the acquisition process on your behalf.
Buying
If you decide to buy premises a Chartered Surveyor can negotiate the deal on your behalf. If required, they will recommend and arrange appropriate finance.
Leasing
Leasing is the most complex method of obtaining your business premises, with plenty of pitfalls, not least of which is the often complex relationship between landlord and tenant.
The involvement of a Chartered Surveyor is often vital. They can negotiate the lease on your behalf and deal with the terms and conditions of the lease. This will cover such things as cost and length of lease, break options, rent review periods, security of tenure, personal guarantee requirements, service charges, responsibility for repairs, business rates and insurance, future dispute provision and future lease disposal restrictions, including what you can and can't do in regard to sub-letting andÊassignment.
Essentially a Chartered Surveyor is not simply dealing with the present but is looking into the future to ensure that whatever circumstances you find yourself in, your original lease contract will put you in the best possible position that could be achieved at the time of its negotiation.
Licencing
The least used of the acquisition methods, because it is usually only suitable and available to start-up businesses in large urban areas. It minimises your business's financial commitment but the consequence is to reduce your rights. A Chartered Surveyor will help you understand whether it is of any value to your business.
Disposing of your premises
If you are moving, one of the most important issues is how to dispose of the premises you are leaving.
If you own the premises you may decide to sell them or - if you or your business can afford it - to retain and lease them out. Either way a Chartered Surveyor can organise it for you. In the first instance this will mean marketing the property and preparing a dossier that will provide all the information a potential buyer will need to make an informed decision. In the second instance, advising on the best way to retain the premises, then marketing the property to potential tenants and acting on your behalf, in conjunction with your solicitor, to negotiate a lease with the incoming tenant.
If you lease the premises and haven't reached the end of your lease, much of what you can do will be determined by its terms. Subject to your lease, two options are typically open to you - sub-letting, where you continue to pay rent to your landlord and collect rent as a landlord from the new tenants, or assignment, where you effectively pass the lease on to a new tenant who deals direct with your landlord. Both are complex and typically do not free you of your original responsibilities under the lease. A Chartered Surveyor will advise on the appropriate course of action and take charge of the process for you.
Dealing with your landlord
Assuming that you are able to reach an agreement with your landlord as to your lease, the final issue to be dealt with will be their "schedule of dilapidations' which may ask you to make - or pay for - various repairs to the premises you are leaving.
Your Chartered Surveyor can deal with this on your behalf, referring to your original lease and "schedule of condition' and negotiating with your landlord to reach the best possible outcome on your behalf.
About RICS
The Royal Institution of Chartered Surveyors, or RICS, is the world's leading professional body dedicated to the economics and management of land, property, construction and related environmental issues.
RICS offers impartial, authoritative advice to many businesses and governments worldwide - we have 110 000 members in 120 countries. Only RICS Chartered Surveyors can use our logo and the letters, FRICS, MRICS or TechRICS. It means any advice they give will be of the highest professional standard.
Our members are bound by a strict code of conduct that regulates how they deal with you and your money. They are also required to have professional indemnity insurance.
We can put you in touch with one of our members local to your business. They will meet you - ideally at your premises - to discover how they may be of value. If you wish, they will conduct a study of your premises and make recommendations as to how they could best serve your business and support it with potential costs and the savings you may be able to make.
Get in touch with a local RICS Chartered Surveyor or call 0870 333 1600
Contact us
web: www.rics.org
email: propertyinbusiness@rics.org
post:
Royal Institution of Chartered Surveyors
12 Great George Street
Parliament Square
London SW1P 3AD
United Kingdom
tel: +44 (0) 870 333 1600
fax: +44(0) 20 7334 3811
"All businesses need premises that work for them, not against them. With property costs typically second only to wages in the league table of outgoings, it is essential that businesses focus on the issues and make informed decisions."
Digby Jones, Director General, Confederation of British Industry.
Case studies
Find out how using the services of an RICS Chartered Surveyor helped one busy hotel save £46,000 in a rent review.
client
"I've got a busy hotel to run, with guests to keep happy on a day-to-day basis.
I was assigned the lease on the premises more than 10 years ago, so wasn't able to negotiate the terms of the rent reviews.'
Tony Voogd, Old Farm Hotel
chartered surveyor
"I wasn't involved with the original tenant, nor my client when they were assigned the lease, so things were not as I'd have ideally liked. There was no schedule of condition upon entry, no definition of the internal layout at the start date, the rent reviews were upwards only and the lease had a restrictive use clause.
The first rent review I dealt with, the landlord was seeking an increase of just under 60% based on an open use clause and the current state of the premises. I built our case around the fact that the restrictive use clause needed to be taken into account and although my client had significantly improved the hotel, the landlord had no right to take it into account in the review. The rent increase was finally agreed at 16.6%.
In the second 5 yearly rent review the landlord proposed an increase of 43%, justifying it on the hotel's occupation income. I successfully rejected this proposal on the basis of the terms of the lease and proposed an alternative criteria based on rental inflation. The result was an increase of just under 12%.
In total, I've saved my client £46 000 and my fees for doing so came to a little over £2 000.
Cathy Edwards FRICS
Discover how a fast growing dietary products business saved £67,000 by talking to an RICS Chartered Surveyor.
client
"We manufacture and market dietary products and meal replacements.
Our business has grown by 30% in 3 years and we had to find more space quickly. Frankly, I didn't have the time or the expertise to deal with it.'
Rob Thompson, Cambridge Manufacturing
chartered surveyor
"I took over the negotiations for the cost and terms of the lease in its entirety, including the repairing obligation. Although my client had found premises that were ideal, they were right next door to his existing business, so in a certain sense unique. The fact he was in a desperate hurry didn't help at all, yet I had to avoid his potential landlord taking advantage of the situation.
The outcome was very satisfying indeed. I was able to save my client over £67 000 in the first 5 years, agree an initial rent free period and introduce periodic escape clauses in a relatively long lease, giving my client both security of tenure and real flexibility if things didn't go according to plan.'
Ian McRae MRICS
To claim your free 'Getting serious about your business premises' CD-Rom which provides more in-depth guidance on the issues relating to your business premises, and for details of RICS Chartered Surveyors in your area, simply complete and submit the form below.
In the UK, business premises are...
...usually a business's second biggest cost after wages
...typically a business's most important fixed asset
...worth £400 billion
...wasting up to £18 billion a year through inefficient management
...capable of improving a business's profitability by up to 13% if managed efficiently
...managed better by tenants. Owner-occupiers could save up to £9.5billion a year by adopting a similar approach
...taxed a total of £15 billion, of which 75% is business rates
...costing tenants and owner-occupiers c. £300 million in over-charged business rates
To find an RICS surveyor in your area just complete and submit the form below.