After some five years at Marble Arch, Saracens recently announced its relocation to the heart of Marylebone. The move reflects the firm’s continued expansion and was indeed welcomed by the team and our clients with the prospect of positive change, greater space, a technically advanced infrastructure and a prime location.
We have drawn from our experience with the relocation to provide ten key tips and highlight the pertinent property issues for those who are considering a business relocation to leased premises.
1. Length of lease and break clause
The length of a lease is ultimately a matter of negotiation between you and the landlord and should be determined with your future business objectives in mind, i.e. plans to expand, your budget, staffing levels, etc.
Despite due consideration, relocation will always come with an element of uncertainty for any business – there is no guarantee that the premises will be suitable for the business’ future. A possible way of achieving flexibility to terminate a lease early is a break clause. Generally landlords will wish to impose certain conditions on the exercise of a break option in which case you should seek legal advice before agreeing to these.
2. Space and square footage
Many properties are let with reference to square footage. The figure which the premises is marketed at may not always be the correct measurement. You should ask a qualified surveyor to verify the floor space.
A discrepancy in the measurement can impact on the rent, service charge, landlord’s contribution and even business rates.
3. Rent / rent free period
In the current market, which has seen many properties vacated, there has been widespread opportunity for incoming tenants to be offered inducements such as reduced rent or a rent free period or both. The benefits of these incentives will help boost your cashflow amidst the relocation.
Rent is often calculated by multiplying the square footage by the cost per square foot – you should ensure that the measurement is verified.
4. Rent deposit and release
Given market conditions and an increase in tenant insolvency, landlords are looking for greater security from tenants and are likely to ask for a 3-6 month rent deposit, if not more.
You should try to negotiate a release / return of the deposit after a certain period of time which will help your future cashflow.
5. Service charge
Commonly where a premises forms part of a building, landlords will require tenants to contribute to certain maintenance and repairing charges for shared areas – this is known as service charge. You should try to negotiate an annual cap on service charge which will provide certainty on service charge expenditure.
You will also need to check whether a contribution to the insurance premium is or is not included within the service charge payment.
Service charge is also linked to square footage and therefore measurement verification is essential.
Before the relocation, you will need to know exactly what your business’ needs are in terms of facilities for the premises itself as well as facilities that the landlord will offer.
On inspection, you should establish phone, fax and computer network connections, the number of power outlets, server room requirements and cabling installation. Planning early will ensure a smooth transition of your business’ communications infrastructure. Where necessary you should make as many on-site inspections as you require.
Most serviced offices offer the usual facilities, such as electricity, water, gas, cleaning, repairing, heating, and cooling to the common areas. You should also check which facilities are being offered by the landlord, whether these are restricted to certain hours / days and whether such restrictions will impact on your business.
7. Fit out works – landlord’s consent
If you require a change in the layout of the premises such as the installation of partition walls, you may need the prior consent of the landlord. If you raise this at the time of negotiating the terms of the lease and obtain the landlord’s agreement to provide a license for alterations, you can avoid any potential delays in setting up the business’ operations as well as the additional charge that a landlord will usually require once the lease is signed. Additionally, you can request a rent free period for the purposes of undertaking such works.
You should consult with a planner who will need to draw up plans and provide specifications – the landlord’s approval will be based on these. You will also need to speak with your building contractor and ascertain the duration of the works. This will assist in planning the time of the intended relocation.
8. Landlord’s contribution to dilapidations
Depending on the condition of the premises, landlords may offer a contribution to assist the tenant with any planned improvements. The contribution is often calculated by reference to square footage.
9. Inspection of records
A landlord is obliged to maintain certain records which include asbestos, health and safety, fire safety and gas/electrical safety certificates. These can be reviewed during an on-site inspection (if not made available to your solicitors). You should check to see if the records are up to date and whether the landlord has complied with any recommendations made by the relevant authorities.
10. Dealing with your old lease
If you are already at a leased premises, consider your exit strategy. Check your lease and speak with your landlord to see if the following options are available:
- Agree to terminate the lease
- Exercise a break option in the lease
- Assign the lease
- Sublet the premises
When leaving your old premises, you should be mindful of your repair obligations and the requirements to put the premises in a suitable condition. If you have undertaken works, the landlord may insist that you remove any alterations that have been made. The landlord has the additional right to serve a schedule of dilapidations if you have failed to comply with the repairing obligations. There are of course associated cost implications which you should include in your relocation budget.
The final tip is to remember that all of the above terms can be negotiated before the lease is signed. It is important to confirm all the agreed terms, set these out in the heads of terms and engage a solicitor to advise you.
Having the foresight of these issues and instructing Saracens will ensure you achieve business continuity and most importantly, a smooth transition to your new premises.