Take time to make right property move

But there’s more to consider than just location, location, location.

I recall a tale I heard recently about a company that wanted to consolidate two offices. It looked at a map and decided its new HQ should be exactly between the two.

Unfortunately, its admin staff didn’t want to travel from either site to the new one. And to make things worse, the kind of workforce around the new base just wasn’t available at the old pay rates.

So the move ended up being a very expensive one as the firm had to recruit and at much higher rates.

Of course different options will suit different businesses. Working from home is a good option if all you need is a small office space. But there are important practical and legal considerations, too.

You can also rent premises or buy a property outright.

Taking time to draw up a list of what is needed is a good way to start your search. It might include size and layout, structure and appearance, any special structural requirements, facilities and comfort for employees and visitors’ utilities, such as power and drainage, permission, including planning permission, to use the premises for your type of business.

Another key consideration is long-term business planning and not being tied to space if the company needs to grow.

Costs can include those of initial purchase, legal costs and and professional fees for surveyors. Then there’s the cost of alterations, fitting out and decoration.

Think about which requirements are essential and which are desirable, and prioritise them accordingly to make your decision.

Choosing the right location can be something of a balancing act. Ideally, the location should be convenient for your customers, employees and suppliers – without being too expensive.

For employees, the best location will be easy to travel to. Good public transport links and local parking facilities or spaces make it easier for employees who don’t live within walking distance.

You may want to be near suppliers for a quick, flexible service. Deliveries may be easier if there are good road and transport links.

Then there’s the decision about whether to rent or buy and different obligations placed upon the business.

l Read more about commercial property decision making by visiting the Business Link website at www.startupbusinesslinkeast.co.uk

KEEPING THIS BIT IN CASE I GET SPACE BACK

The advantages of renting depend on exactly what you have agreed with the landlord. With a typical lease, you agree to occupy the premises for a fixed number of years and pay an agreed rent, though the lease may allow the rent to be reviewed periodically. Upfront costs for leasing premises are often relatively low, though you may pay a premium to purchase the lease. Sometimes you may also have to provide a refundable deposit. You should also take into account legal and other professional fees.

However, there are disadvantages. You may have significant maintenance and repair obligations. The lease may include other obligations and restrictions. You may also have difficulties if your needs change and you want to move before the lease ends.

A new revised code of practice has been launched to help promote fairness in commercial leases. Although the code is voluntary, it does contain useful advice that can help you negotiate favourable lease terms if your landlord does not offer a code-compliant lease. Access the revised code of practice for leasing business premises on the Code’s website - Opens in a new window.

Some properties are available on flexible, short-term licence agreements. A typical licence agreement allows you to rent the premises for minimal upfront costs - typically a refundable deposit equal to one or two months’ rent. Although you must keep the premises in good order, you are not responsible for structural repairs.

If you do decide to rent premises, it’s important to check exactly what the agreement says. If you are in any doubt, you should take legal advice. You should also be aware that you still have general legal responsibilities, such as looking after the health and safety of employees and visitors to your premises, though these responsibilities may be shared with the landlord. For more information, see the page in this guide on legal considerations when choosing business premises.

For more information, download a guide to renting business premises from the Communities and Local Government website (PDF, 242K) - Opens in a new window or see our guide on renting business premises.

Most small businesses do not have the capital available to purchase their premises outright. Even if you can borrow to finance the purchase, you may feel that you have better uses for your capital.

If you do choose to buy, it can have several advantages:

you control your own premises and can stay there as long as you like

you can choose to occupy the premises yourself, rent them to someone else, or sell them

your costs are relatively fixed, particularly if you have a fixed-rate mortgage, whereas rents can increase significantly over time

you can alter the premises to suit yourself - subject to legal restrictions

over the long term, the value of the property may rise

Against this, you have to weigh the disadvantages. Buying property is an expensive and often time-consuming process, involving significant professional fees and stamp duty. You’ll also be responsible for all the maintenance and repairs. If your needs change, selling the property can be difficult and expensive, and you might find that the value has fallen.

You may be able to claim capital allowances towards the cost of renovating or converting your business premises. Since 11 April 2007, businesses in designated disadvantaged areas have been able to claim 100 per cent capital allowances on the costs of renovating or converting business properties that have been vacant for more than one year.

Find out more about capital allowances in disadvantaged areas on the HM Revenue & Customs website - Opens in a new window.

Legal advice is strongly recommended if you are buying premises. You’ll also need to be aware of your legal obligations. For example, you’ll need to ensure that the premises meet health and safety standards. For more information, see the page in this guide on legal considerations when choosing business premises.

For more information, see our guide to buying business premises.

Decide whether you could work from home

If you have the choice, working from home may be a much better option than renting or buying business premises. It’s a common choice for people who just need a small office, or who spend most of their time working on client premises. For more information, see our guide on starting a business from home.

However, working from home may not be an option if it significantly changes the use of the building, or affects your local area, for example if you have lots of visitors. Also, if you rent your home, your licence or lease may carry restrictions on using it for business purposes.

Drawing up a list of what you need can help you decide whether working from home is a possibility - see the page in this guide on your requirements.

Planning the home office

Practical issues you need to think about include properly equipping your workspace. If you work at a desk you need a comfortable workstation. Consider any potential hazards to yourself, workers, visitors and other members of your household and how to reduce the risk of accidental damage to your work or equipment.

You also need to think about how to separate your work and home life. It helps if you can avoid being disturbed when you are working. You also want to be able to relax during your time off without being interrupted by work.

Financial and legal issues

Working from home can have important consequences for your mortgage, insurance and tax position. For example, your mortgage might not allow you to use your home as a workplace, and your insurance might be invalidated if you do. There are also legal considerations, you might need planning permission, or you may become liable to business rates. See our guide: business rates - an overview.

Even if you just have a small home office, or work on client premises, you’ll need to think about health and safety. You must carry out a health and safety risk assessment, taking into account the kind of work you do and the risks to other people.

For more information, see our guide on how to use your home as a workplace.

Legal considerations when choosing business premises

If you own or occupy business premises, you need to understand the legal obligations and restrictions that affect you. For example:

The premises must have planning permission that allows them to be used for your type of business. For more information, see our guide: an overview of the planning system.

You must comply with building, fire, and health and safety regulations.

Stamp duty is payable on commercial leases and you are likely to be liable for business rates, though in rented premises these may be paid by the landlord. For more information, see our guides: business rates - an overview and stamp taxes.

You are responsible for the health and safety of employees and visitors. See our guide on what workplace facilities do you need to provide?

You also need to provide a suitable working environment.

If you provide goods or services to the public, you must take reasonable steps to make your premises accessible. See our guide on access and facilities for disabled people.

You need to comply with the terms of any lease or licence agreement.

For some businesses, you may require a licence to operate or to sell certain products.

There may be restrictions on times when deliveries are allowed, noise and pollution levels, and how you or your customers dispose of waste.

In licensed or leased premises, responsibilities are shared between the landlord and the tenant. For more information, see our guide on commercial property: responsibilities of landlords and tenants.

Whatever premises you choose, you need to ensure that you are properly insured. For more information, see our guide on how to insure your business and assets - general insurances.

If you are in any doubt about your legal obligations, you should take advice from your business adviser or solicitor.

Search for premises

It’s worth starting by drawing up a specification or ‘spec’, clearly setting out your requirements. Distinguish between what is essential and what is desirable. For more information, see the page in this guide on your requirements.

You can then circulate this spec to likely sources of premises such as commercial agents who act as estate agents for commercial premises. Local surveyors who can assess the condition and value of premises may know of suitable properties in the area. Your local authority, Business Link, Chamber of Commerce and your trade association may also be able to help. You can find useful contacts using our Contacts Directory.

At the same time, you can check local newspapers and specialist papers such as Daltons Weekly. You can find properties on the DaltonsBusiness website - Opens in a new window. You can also search on the internet, or just look for advertising boards on local properties.

Check any potential premises against your spec and eliminate any that don’t at least meet all your essential requirements. Then you can draw up a shortlist of properties to visit.

At this stage, you may want to involve professional advisers. For example, a surveyor can assess the condition of premises and give you an idea of their value. For more information, see our guides on buying business premises and renting business premises.

Finally, your solicitor can help negotiate the deal and complete the legal work. For more information, see our guide on how to choose and work with a solicitor.