Leasing a property - what you need to know

[edit] Introduction

Signing a lease for a property is a big commitment, whether its a business moving sites or a new business opening its first site. Understanding the needs of an organisation is as essential as knowing the cost.

Being tied to a lease that is not fit for the organisation can be detrimental and sometimes disastrous. If the property with which there are financial ties is not fit for purpose, the business can suffer, in ways that include the following:

• Lost sales.
• Delayed income.
• Increased expenses.
• Contractual penalties.
• Customer dissatisfaction.
• Delay of new business plans.

[edit] Considerations

Occupying new space is a good time for an organisation to review their ways of working to ensure no more space is taken than is really necessary.

Hot desking is a solution that works for some staff like sales teams where desks are used infrequently, but it will be less well received in teams that are static, like finance or human resources who are more often than not in the office every day.

Reviewing working practices can be carried out by engaging existing teams about the way they currently use their space. This opportunity can actually have a positive impact and enrich the working environment for employees. There are ideas like stand up meeting spaces and open plan collaborative space which take up less space than traditional meeting rooms. Desks often lie empty for long periods of time and take up floor space, if working practices are reviewed a robust and flexible layout can be achieved.

Taking on new space and installing an organisation’s style and branding can come at a price. To maximise budget it may be useful to use high-range furniture and fixings for front of house, client facing areas while mid-range can be used for back office and support service areas. Desks, chairs and services are expensive assets, not only to purchase but also to maintain throughout their lifecycle. Understanding the true cost per desk per year is a good exercise for the business to do.

While organisations look for the space they need to accommodate their business, there are other areas that need to be considered with regard to the physical property, starting with electrical power.

[edit] Electrical infrastructure

The electrical infrastructure of a building can vary considerably. Capacity and age of the installation are key areas to understand – upgrading can be an expensive exercise if the system is not fit for the organisation’s needs. Things to consider are:

• Is there an adequately sized electrical mains supply that meets the needs of the processes and/or people to be accommodated?
• Is there a requirement for back-up electricity in case the mains fail?
• Are renewable sources of energy available or could they be fitted?

[edit] Other services

It is a similar situation with mains natural gas, water and sewage, telecoms and broadband. The capacity of these systems should be understood and evaluated to ensure they are adequate to support the organisation’s processes.

Ventilation and temperature control are easier to retrofit if the current system is not adequate for the organisation’s purposes. Unless the space is going to be occupied in the same layout as the previous tenants this system will require investment anyway. The following are some questions to consider:

• What type of temperature control is required for occupied areas?
• Are there any special areas with a higher heat load that need to be dealt with differently?
• Is there specialist ventilation for cooking or manufacturing needed?

[edit] Obligations under a lease

Usually a landlord’s permission will be required to make internal non-structural alterations and leaseholders are not allowed to make structural alterations. Therefore, if the space requires considerable alteration this should be discussed before agreeing a lease.

A lease can pass on full repairing and insuring obligations to the tenant. The repairing obligation is likely to stipulate at the outset that as at the date of entry, the tenant accepts the premises in ‘good and tenantable condition and repair and fit for the purpose for which they are let’ or similar words, whether or not they are.

The tenant, if they accept this, is thereafter obliged to repair, maintain and renew the premises in that state throughout the term of the lease and to hand it back in that state at the end of the lease. It is important, before accepting that obligation, for the tenant to ascertain whether the premises actually meet this hypothetical ideal.

Usually a full building fabric and building services survey will be conducted to highlight any problem areas for discussion during lease. Should the premises be in poor condition, the building can be brought up to standard by the landlord prior to taking occupation or the lease can agree the removal of certain assets from the repairing obligation.

Another option would be to append a schedule of asset condition highlighting the state of the premises at the date of entry and specifying that the premises will be returned in no worse, but no better, condition than as they are at the date of entry as evidenced by the schedule.

Any of these options acts as a limitation on the ‘full repairing’ obligation in the lease. A tenant may also wish to exclude fair wear and tear and/or latent and inherent defects from the outset. Conducting condition surveys every five years is a good approach to ensure that the building is being maintained to a standard that meets your lease obligations and can help plan for life cycle replacements that will be required before relinquishing your lease.

[edit] Location and space

The organisation will need to work through how much new space their business activities will need and what flexibility can be anticipated for future growth at the property. New buildings are built to maximise useable space but older buildings can be a challenge to reconfigure.

Access also needs to be considered both for appropriate disabled access and access for equipment that you might need to bring in. One area that might not get the attention it needs is the internal floor construction: will it structurally support the moving of equipment or the installation of any manufacturing needs or IT servers?

Location, location, location are the three things organisation’s look for in a property. But the location should be looked at for not just its vicinity to other businesses, amenities and access but also security of the location, if the parking needs will be met and if the access routes are suitable for heavy haulage if that is a need for the business.

The history of the property needs to be researched as well. Is there a history of flooding, or other local environment conditions that could impact on access to the property?

Space is the next consideration. There is a recommended minimum standard for space per person in the Workplace, (Health Safety and Welfare) Regulations. It states that the total volume of the room, when empty, divided by the number of people normally working in it should be at least 11 cubic metres of space for each person, based on a 3 m-high ceiling, this is the minimum set for health and safety reasons.

There are resources such as the British Council of Offices (BCO) that can provide insight into what an efficient workplace should contain and research is published on feedback from occupiers to support decision makers. There is other space such as meeting rooms, welfare facilities, walkways and storage that will be needed; all of these can add up to needing as much communal and collaborative space as is needed for people and desks. Getting the basics right is important for occupant comfort and wellbeing.

Finding an appropriate building, negotiating the lease and finally moving in can be a long and laborious process for any business. By considering the occupants comfort and wellbeing as a key priority a business will not only see staff engagement improve but also start to see success in other parts of their business.

This article was originally published here in April 2017 by BSRIA. It was written by Jo Harris.

--BSRIA

[edit] Find out more

[edit] Related articles on Designing Buildings Wiki

• BSRIA articles on Designing Buildings Wiki.
• Difference between assured shorthold tenancy and assured tenancy.
• Excluded occupier.
• How to evict a tenant.
• Landlord.
• Lease Negotiations - Tenants Checklist.
• Leasehold.
• Leasehold covenants.
• Leasehold enfranchisement.
• Restrictive covenant.
• Subletting.