There are any number of reasons why a business might relocate: it might be looking to grow or consolidate, improve working conditions or capitalise on transport links. Whatever the reason for the move, it will have taken into account its current needs and anticipated development. But near or far, implementing a move requires detailed planning, attention to key deadlines – and time.
Location, location, location
Location is often the number one consideration for businesses. Access to transport, suppliers, markets and skilled staff are all key factors. In addition, government funding designed to help and encourage growth in a particular area could be used to help cover the cost of relocating your business.
The idea of a move may be exciting, but what about your current premises? Your exit strategy will normally take six to 12 months to put into effect, so take early advice to avoid costly issues arising.
If you own the freehold of your existing premises, your options will be to sell, or redevelop or lease the space to tenants. That decision will most likely be driven by your strategy and the financial considerations of relocation. Each route presents its own unique challenges and specialist advice may be required.
For example, where property is to be redeveloped involving substantial changes in the structure and appearance of buildings and/or change in use, planning consent will be required. The planning application procedure is often complex, and a specialist planning consultant will add value, ensuring you obtain all the consents you need to implement your plan.
If you decide to lease your building, finding a tenant with good covenant strength will be key; it must be financially stable and profitable to be able to discharge its liabilities under the lease (eg. the payment of rent and liability for repairs) which will in turn preserve the value in your property investment. Consider this: a steady and guaranteed revenue stream could be far more valuable than a higher rent. Use your property agents and lawyers to find potential tenants, advise on their covenant strength, and negotiate the terms of the lease and associated documents.
As the occupier of premises with a lease, you will need to consider whether the lease can be transferred to another party, or whether there are any break clauses that allow you to end the lease early.
Transferring a lease to a third party often requires the landlord’s permission; they will want to ensure that the incoming occupier will be a good covenant strength, and may require the outgoing occupier to provide guarantees. It is important to understand a landlord’s requirements - and also to identify where a landlord is acting unreasonably.
If you have a break option, check whether it is a fixed or rolling break date. A break clause will require a tenant to comply with specific conditions; failure to meet them could render the break ineffective, and you will remain bound by the lease for the remainder of the term. The potential risks involved in this scenario mean that specialist advice to ensure a break option is exercised effectively is crucial.
When a lease ends or is terminated, a landlord may be entitled to bring a claim for damages if any covenants relating to the repair and condition of the premises have been breached. Such “dilapidations claims” can be a significant liability if legal and strategic advice is not sought; ideally you will leave the premises as directed by your lease – but remember to factor the time and cost required into your relocation plan.
If there is no break clause or assignment isn’t an option, you will need to approach the landlord to negotiate and agree to a surrender of the lease; the landlord may require a premium or guarantees to be given, and as the departing tenant you will need to understand the potential consequences contained in any agreement.
Whether you are buying or renting new premises, advice on any new obligations and liabilities you’re taking on would be wise.
If you need to carry out any fit out works, any agreement will need to ensure
that everything is in place to complete the works before the big move. The landlord is likely to insist that be reinstated when you eventually leave – and that’s another potentially onerous agreement to be negotiated and documented.
Property is actually just one (major) element of any relocation. A host of contracts will need to be agreed, terminated, moved or renegotiated before you can step over the threshold, and the legal considerations in respect of your most valuable asset – your people – demand serious attention.
Relocation is a long term project, and preparation is key; doing your homework and getting the right support when necessary is the only way to ensure that you minimise the risk to the continuous operation of your business.