But while residential properties remain high on the dinner-party chit-chat agenda, there’s not so much information available for printers wanting to execute a move.
“When starting our printing business and moving into our first premises in 2000, my business partner and I were rather wet behind the ears and had no idea about the rental agreement that we were entering into. Yet my former lawyer allowed me to naively wander into this minefield,” says Andy Wilson of Rochester-based PressOn.
Fourteen years later and about to move to a new site in Chatham, Wilson is still bemoaning the lack of guidance available.
“There is very little protection for you as an individual entering into a rental contract,” he says.
“What’s apparent is that moving commercial property is not something that you are going to do many times in your lifetime, which makes you largely inexperienced. And yet there are people who will allow you to sign a tenancy without making all the necessary checks.”
“It is important to find a lawyer who really knows about the property and area that you are moving into,” he adds.
Wilson’s top tip for property hunters is to “get a decent surveyor” before committing to renting or purchasing a property, as they will check the condition of the premises, with a full structural survey. This typically costs £1,000-£1,500.
“A good surveyor will do everything required, including inspect the property, negotiate the rent and the terms of the lease, ensure the landlord honours his commitments and compiles a Schedule of Condition, which is needed to ensure that the landlord doesn’t take you to the cleaners [financially] when it comes to moving out,” says Wilson.
Printers thinking of making a move without taking professional advice should think again, according to Wilson. “You are not a surveyor or an architect, an estate agent or a lawyer, you are a printer. It is therefore best to get all information and guidance from the property professionals,” he says.
So what would property professionals advise printers to do to ensure that any relocation plans are successfully executed?
Finding the right property
When viewing properties, printers should consider location, size, amenities, ease of access by customers and staff, the road network, interior configuration and logistics, refurbishment costs, and the terms of the lease (if applicable), and then register with a local estate agent.
“The agent may well be aware of properties that are available ‘off market’, ie that are not being publicly marketed,” says David Broschomb, chair of the Institution of Commercial & Business Agents (ICBA). “The agent will have inspected the property and advised the owners of the market value that it could achieve.”
Printer Awesome Merchandise recently moved to a new 1,022m2 custom-fitted unit on the outskirts of Leeds City. Around 90% of the company’s workforce lived within a three mile radius of their previous location – also on the outskirts of Leeds – so the company wanted to remain as accessible as possible for current and future employees.
“We wanted to be close to main transportation routes and retain a connection to Leeds central business district. In the end, we targeted the industrial estates closest to the city centre and started searching,” says general manager John Lyall.
Negotiations
When negotiating a new rental lease it’s important to get the right professional guidance from the outset, according to Amanda Timcke, a commercial property lawyer at Birkett Long.
“Many companies get caught out by failing to have certain clauses included in the lease. Printers should focus on securing the rental terms they want, including rent-free periods and/or break clauses,” she says.
A rent-free period is typically offered by landlords when trying to encourage a firm to sign a new contract or renew an existing lease, while break clauses are usually available three to five years into a tenancy at a notice period of three to six months.
“Any break clause should coincide with the rent review period, just in case the landlord tries to hike up the rent to a higher rate than you’d care to pay,” advises Timcke.
Repairs and alterations
When commercial property is let, the lease or tenancy agreement sets out the responsibilities of the lessor and the lessee, including who will be responsible for repairs, as part of the ‘repairs and alterations’ clause. Leases may be fully repairing and insuring which means the lessee is responsible for all repairs and insuring the building. This includes structural, internal and external repairs.
Fully repairing and insuring leases work well when a tenant takes a new building, or a modern one in good condition. However, the lessee should typically not accept responsibility to repair the building and to put it into good repair if it is not in good condition on commencement of the term.
Whether or not you are considering restoration or alteration work, make sure you set yourself up with watertight protection from the outset when it comes to repairs and alterations to avoid any nasty surprises at the end of the tenancy.
Timcke says: “You need to consider what alterations you are planning to make to the premises to suit your printing business and engage with the landlord at the outset, to ensure that he doesn’t try charging you for extra repairs at the end of the term, and for that there needs to be a Schedule of Condition in place.”
Schedule of Condition
A Schedule of Condition records the precise condition of a building, normally for legal or contractual reasons, and is necessary from the lessee’s point of view – ideally accompanied by photographs – to ensure that the landlord does not insist the lessee bring the property up to a higher standard than initially existed.
“It’s very important from a tenant’s perspective that a Schedule of Condition is done and done properly. Otherwise, it’ll be very difficult to argue with a landlord that you didn’t cause certain damage to the property and that you aren’t responsible for the repair,” adds Timcke.
Schedule of Dilapidations
Landlords sometimes issue a Schedule of Dilapidations on lessees to make sure their property is maintained properly and ensure proper dilapidations practice by warning tenants in advance of neglect. The Schedule will identify items of disrepair to be made good by the tenant at the expiration of the lease and often forms the basis of a financial claim by the landlord if the tenant does not comply with their obligations.
The Landlord and Tenant Act 1954
When negotiating terms of a new contract, consider the Landlord and Tenant Act 1954; an important piece of legislation that gives business tenants the right to renew their tenancies, at a full market rent.
“Tenants should aim to ensure their lease is within the 1954 Act otherwise they will not have the rights to automatically renew their lease, leaving them vulnerable to eviction,” advises Jennifer Caplan, a surveyor at TSP Commercial Property Services.
Executing a move
The success of any factory relocation is usually reflected in the amount of planning and organisation done beforehand.
Broschomb comments: “There needs to be as much planning as possible to ensure that the printers, irrespective of size or complexity, are shut down for as short a period as possible. Theoretically the best situation arises if there is a crossover of tenure on the two properties in order to maintain as much continuation of service and product as possible.”
Caplan says: “It’s wise to try and give yourself a comfortable time period to search for and eventually move into a new property as it could take a few months, especially if you need to make modifications to create suitable space for your machines and ensure that the electrical set-up is sufficient.”
Broschomb is aware that moving printing equipment is definitely not “a man with a van operation”, and requires careful consideration.
“Employ a commercial removals company that is experienced in your needs and type of business equipment you use,” he advises.
Awesome Merchandise’s Lyall comments: “We spent a lot of time mapping out the factory’s layout to assist the placement and commissioning of machinery as soon as it was unloaded from the HGVs. Our staff were assigned to either the ‘decommission and load team’ or the ‘unload and commission team’, and received instructions throughout the day from team leaders.”
But before moving and recommissioning the equipment, Lyall advises that printers check with their machinery suppliers as to whether it would void any warranty if this were to be done in-house. “You may find you need to pay for a specialist move team to do this for you,” he advises.
Budgeting
For many printing businesses, property costs are the largest or second biggest overhead after machinery expenditures. And the cost of fitting out a factory can often end up costing more than you might have expected.
“With large IT and electrical power requirements, not to mention potential alterations to the property, it’s wise to make sure that you have more money available than you may have initially expected to spend, as refurbishment costs always end up costing more than you anticipate when it comes to setting-up a unit for productivity,” says Jon Lancaster of Falkland Press, which recently moved to a new 4,000m2 factory in Letchworth, Hertfordshire, to accommodate a raft of new equipment, including the HP Indigo 10000 it acquired last year.
Summary
Because of the high costs involved, you need to think very carefully before deciding to relocate to a new factory. That is why you must consider what lease length is right for your business.
Would the ability to terminate or ‘break’ the lease early help and are you prepared to pay a premium for this option? Have you calculated the total occupancy costs of the property, taking into account the rent, service charge, business rates and insurance premiums, among other expenses?
To help you prioritise your requirements and make a calculated decision that is right for your business, you need to take all these factors into consideration, plus so much more.
TOP TIPS
Preparation
Planning Leave plenty of time to plan your factory relocation in case of unexpected delays. Typically 9-18 months prior to your lease expiry is a reasonable lead time, depending on the size of your firm. Prepare a relocation checklist.
Relocation project team Putting together a relocation project team, including a suitable and competent project leader who is responsible for overseeing the move and fit-out process, is crucial. Other internal project team members should be drawn from sales, finance, marketing and IT.
Professional guidance Engage the services of professional help, such as machinery relocation professionals, including commercial property agents, solicitors, office fit-out, IT, telecoms and office removals, to reduce risk and avoid costly mistakes.
Set a budget A factory relocation budget will help you stay on top of your costs before, during and after your transfer.
Your premise options From short-term leases to outright purchase, you need to think about the type of property tenure that makes sense for your business.
Freehold purchases Buying freehold property puts you in control of your premises, enabling you to occupy it indefinitely, with no landlords to answer to or to seek planning consent from to alter the unit, subject to planning permission and building controls. However, owning property is a major commitment that brings responsibilities and potential liabilities.
Buying costs Professional fees, Stamp Duty Land Tax (SDLT), land registry fees and potential VAT, can add thousands of pounds to the purchase price. If you are arranging a commercial mortgage, a considerable cash deposit – 25%-plus – of the property’s value is required. Commercial mortgage rates vary.
Taking a lease For many businesses, a rental lease is the most attractive premises option – it offers the company a secure base without the expense of buying. A long lease may appeal if you plan to alter the premises or build up a local clientele, but it’s also inflexible if your needs change. Aim to negotiate a ‘break clause’ – to coincide with a periodic rent review – or the right to sublet the premises.
Renting costs A premium and deposit may be required for the lease. Other initial costs can include SDLT and legal fees. Ongoing costs include rent payments, service charges, business rates, insurance and normal occupancy costs, such as utility bills.
The Landlord and Tenant Act 1954 Business tenants may be adversely affected if forced to leave the premises when the lease expires. Aim to have the Landlord and Tenant Act 1954 incorporated into a lease as this gives the tenant the right to renew their tenancy.
Repair and maintenance responsibilities Your lease should set out clearly your repair and maintenance responsibilities and what rights you have to alter the premises.
Lease repairing covenants Fully repairing and insuring leases mean the lessee is responsible for all repairs and insuring the building and potentially putting it into good repair even if it’s not in good condition on commencement of the term. Non-fully repairing and insuring leases are sometimes taken on the basis that the lessee is responsible for keeping the building in no better condition than exists at the commencement of the lease. It’s necessary to record the condition of the property at the commencement of the lease to ascertain whether or not the lessee has complied with its responsibilities.
Inventory A Schedule of Condition, compiled by a surveyor, records the state of a building, normally for legal or contractual reasons. The Schedule, which should include a series of photographs, offers information about the property’s local area, structure, condition and defects.
Dilapidations claims Landlords often serve lengthy Schedules of Dilapidations on tenants towards end of tenancy to ensure they honour repair covenants or to obtain a financial settlement.
Neighbouring property When carrying out building works under the Party Wall etc Act 1996, a Schedule of Condition of adjoining buildings before works start, must be taken to allow party wall surveyors to re-inspect the property upon completion and ascertain whether or not any damage was done.
Building an extension Anyone wishing to alter or extend their new property will have to – if leasehold – request the landlord’s permission and consider how it will impact on a repairing and insuring lease. Also, will you be able to get planning permission to expand?
Moving in
Power your business Once you’ve secured your new property and decided on a move in date, you will want to arrange the connection of essential services, such as electricity and water. When your firm’s equipment and utilities are connected, a qualified contractor should perform a preliminary test to confirm all is working efficiently.
Transportation Use a specialist removals firm to transport the printing equipment, rather than a jack of all trades.
