Culverwell Consulting

COMMERCIAL PROPERTY ADVICE

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Jim Culverwell

Major changes to the planning system you should know about

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The government has produced some dramatic changes to the planning system which may affect you or one of your contacts.  The changes are intended to ease the blockage caused by the need for a change of use and to help the economy. This may have unforeseen consequences – we shall have to wait and see.

The changes took effect on 1 September,  without much fanfare for something so huge. They enable business premises to adapt more easily to other uses. The highlights for business owners and operators are these:

Class E: (Commercial, business and services) brings together:

  • shops (A1),
  • financial and professional services (A2),
  • restaurants and cafes (A3) and
  • offices (B1).

In addition, and of great significance, Class E includes such uses as:

  • gyms
  • nurseries
  • and health centres (D1 and D2).

Previously, businesses such as a physio, dentist, chiropractor/osteopath, gym/fitness centre, would have all needed a change of use.

Other uses like B8, storage and distribution, B2, heavy industry and the C classes, residential, are unchanged.

So, you can see it is a real mix up of uses that were previously separate and this will change the look of town centres gradually but spectacularly.

I work closely with Bell Cornwell Planning consultants who have produced a very clear and succinct briefing note.  Click here to go to the page.

The change of use previously presented an obstacle to moving premises but this change in legislation widens options for your business if you are thinking of a move.

I would love to talk through the commercial property implications and effects for your business – as far as we can know them – and I would be happy to refer you to Rebekah Jubb at Bell Cornwell to answer your specific planning questions.

 

 

WFH – the new normal?

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It hasn’t been great for everyone. Many office-based employees have had plenty of practice at WFH over the last almost five months.  Some have loved it others not so much.

Some have perhaps been treading water waiting to get back to normal only to find that the management has other plans.  The office is closing or you’re only going to be welcome two days a week and over time, the intention is that WFH becomes ‘normal’.

Others are back in already or will be soon.  The boss likes to be able to see everyone at work and knows there has been a loss of efficiency over lockdown.  I have heard some instances where social distancing is being ignored.

As with all things, there is a spectrum of ideas and wisdom on the subject and no one view is universally correct. Every situation is unique and the real answer for most businesses will be somewhere in the middle.

The office environment can be inspiring – the general buzz, sparking off one another and social interaction.  This can foster a culture that is positive and productive. Balance that against removing the time, cost and effort of commuting, the lack of interruptions to the working day and the ability to communicate with everybody and anybody by video call, phone call, email, text and all without having to go anywhere.

However, there are downsides to both scenarios.  Extremes, in most circumstances, do not produce good outcomes.

So, what should a business be looking to do, so they strike the right balance between office interaction and home working?  The challenge is that everyone is different. Each worker, staff member, employee, has different needs, ambitions, requirements, strengths and weaknesses.  It has always been this way but previously we have had a ‘one size fits all’ solution of going to the office every day.  That said, WFH is not new and some businesses have been doing it very successfully for many years.

‘Choice’ is key in drawing some conclusions about how to make the most of your staff and your resources.  Don’t force a member of staff with a difficult or complicated home-life, to work from home and if productivity is not being affected, don’t force the staff member into the office, who is so much happier working from home.

‘Resourcing’ is vital to make your people as effective at home as they can be at the office.  That means helping them find a dedicated area in their home – not necessarily a separate room.  Making sure they have a proper desk and a comfortable seat so that their physical health doesn’t suffer.  They need the equivalent IT hardware, software and support at home, that they would have in the office, including broadband and mobile, so they can work effectively and without disruption.

‘Community’, as we have already seen, is important to many workers.  Real friendships and support networks are established at work and these are diluted when people are not together.  The water-fountain conversations are not going to take place unless an environment is created where that can happen. Being in the office will not be about shutting yourself away to work but about meeting, socialising – communicating face to face.  This is also the driver for the culture of an organisation, which needs careful nurturing within a more dispersed group of workers.  Work form home and socialise in the office.

‘Accountability and measurement’ are important not just for managing remote workers but also for the workers themselves, so they can have the confidence that they are adapting and knowing they are seen to be effective.  Letting people know its OK to water the plants in their lunch hour and start the day by taking the children to school, will produce a relaxed and fulfilled workforce keen to put in the maximum.

‘Flexibility and controls’ will help everyone to know where they are and to flourish.  For some, flexible work hours are what make WFH possible.  If you have young children, being able to work in the evenings may be the only way.  On the other hand, if having done a days work, a staff member can’t put the work down and enjoy an evening as they would have, some intervention may be helpful.  Knowing the measurement is there in the background will encourage people into a routine that suits them and delivers what their job description requires.

Managed “office time” enables the interaction that is always going to be important and should not be downplayed.  Calendar software and a regime that sees everyone coming in for as many days as is appropriate, make managing this vital component possible.  Making changes to the floor-space that the new model requires, will take much longer and needs careful consideration and potentially expert help and advice.  Every unused work-station costs thousands on the bottom line and fine-tuning this costly and inflexible resource could take several years, so it’s not too soon to start.

WFH has been a revelation to many, who never thought it was feasible.  It has brought about a realisation that doing things the way we always have, may have been holding us back and that new ways of working can bring so many benefits.  The cost savings a business can achieve through properly resourced WFH are substantial as well as potentially increased staff well-being and productivity.

 

Navigating the minefield that is commercial property

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The client is NewVoiceMedia, a specialist cloud-telecoms software developers.  I helped them move from a small farm building to an office in Basingstoke where over ten years, the company grew from 30 people occupying one area of 3,330 Sq. Ft to 275 people in eight areas totalling 27,000 Sq. Ft.  As they grew, the shortcomings of the space and the building became more apparent and something needed to change.

In acquiring each new lease, I made sure the lease expiry date or a break option brought all eight leases to an end on the same date.

Because this meant the company could “up-sticks and leave” and because it occupied 30% of the floor space, we had the attention of the landlord. He stood to lose well over half a million pounds in rent and service charge plus he would soon be picking up the rates.  NVM also had other landlords and agents interested in them as new tenants for their vacant space.

The cheaper option was to stay where they were, moving other tenants around so they had one large block, still in a multi-occupied building, and with a modest increase in rent. Cheaper but far from the best outcome.

The better option (and only slightly more expensive) would be to acquire a self-contained building where NVM could control everything.

I found such a building, negotiated the lease to include the replacement of the heating and cooling plant, along with naming rights on the building – NewVoiceMedia House – and a raft of other terms that all added up to an irresistible deal.

Your rent deposit – how much? How long? Who gets the interest? Upsides? Downsides?

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A rent deposit is an amount of money paid by a tenant to act as security in case they (the tenant) don’t meet their obligations under a lease. A deposit is a kind of insurance policy for the landlord against the tenant’s defaulting, and is usually required when the financial standing of the tenant is deemed insufficient.

A rent deposit is generally a specific sum, calculated by reference to a number of months’ rent – three, six, nine or twelve. The deposit is put into a designated bank account accessible by the landlord under specific circumstances detailed in the Rent Deposit Deed. Interest on the deposit should accrue to the tenant unless otherwise specified.

But the most important thing, which is all too often missed, is that it should be time-limited. If the company is only, say, two years away from having the “financial muscle” to stand without a rent deposit arrangement, then the deposit will only remain until that can be demonstrated. The deed should specify the exact financial circumstances under which the deposit is repaid and the deed is extinguished.

The downsides of a rent deposit for the tenant include the obvious fact that the deposit can starve the company of cash and potentially cause financial problems. In addition, deposits have been lost when the landlord goes into some form of insolvency. Neither of these is insuperable: the important point is to have negotiated the terms of the rent deposit before the Heads of Terms go to the solicitors.

The main advantage of a rent deposit for a prospective tenant is that it is a fixed sum beyond which the landlord cannot demand and that it avoids the directors having to provide personal guarantees, which tend to be open-ended.

If any of the points raised in this piece give you pause for thought, please talk to Jim – your independent commercial property resource. Offering workshops, mentoring and project consultancy, supporting and advising SMEs on-premises acquisition and helping avoid problems with commercial property leases.

How to negotiate effectively with a landlord in the best interests of your business

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“I know the Landlord, he’s incredibly nice. We get on so well. The agent is really helpful too.”

How many times do I hear that?

My response to that is: I don’t doubt it. I know lots of very nice landlords too, not to mention their equally helpful agents but is that a reason to approach negotiation of the Heads of Terms of a lease any differently?

When a client instructs me to act on their behalf,  then together it is our responsibility to negotiate in the best interests of the company. If we don’t thoroughly negotiate the Heads of Terms, confirmed in writing, we might be in for some surprises later, wasting hard-earned cash and even putting the success of the company at risk.

Of course, we can negotiate Heads of Terms in a civilised atmosphere of mutual respect and collaboration, but let’s not kid ourselves, the process of agreeing terms is fundamentally an adversarial one. We shouldn’t be diverted from our key objectives by existing relationships.

We should focus on the needs of the business as expressed in the business plan and as if the landlord is a complete stranger.

If we follow this course, our property strategy will guide us towards the Heads of Terms we are seeking and we will send a comprehensive agreement to the solicitors that will work for the business – and there you have it, a lease that works in the best interests of the business with no surprises!

Commercial property advice will significantly improve outcomes and make your solicitor happy!

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It’s uncanny.

“If only our tenant clients would hire someone like you! It would be so much quicker and easier for us – and cheaper for the client. Not only that, the client would get a better deal!”

It happened again the other evening, in Winchester. There I was chatting away in a group that included a Commercial Property Lawyer and out came the same comment I always hear when I tell a Commercial Property Lawyer what I do for my clients.

Businesses lease and purchase premises all the time, but without the business owner seeking bespoke commercial property advice – a DIY job. The transactions mostly go through and sometimes there is not very much contention but it is often a struggle for the tenant’s solicitor to undo the damage without being so frank that they lose the instruction; and usually, some uncomfortable compromises are forced on the business owner who is unaware of just how much they have given away unnecessarily.

Time, money and stress are the costs to the business owner conducting the transaction without independent property advice. The solicitors tell me so every time.

“The solicitors must be able to sort it out. Isn’t that what they get paid for?” You might think so, but in fact – to their frustration and their clients’ detriment – the deal has been done by the time it lands on their desk. Too late to change the fundamental terms. Too late to wind the clock back and begin where the negotiation should have started.

The usual wrangle ensues between landlord’s solicitor saying, “This is an agreement. We are not willing to change anything”; and the business owner’s solicitor trying to rectify the worst mistakes that have, in all innocence, been allowed into the agreement by the DIY business owner.

The curious thing is this is such a well-recognised and acknowledged scenario.

Often it is the things that aren’t included in the Heads of Terms, that have the greatest potential for detriment. Things the business owner ought to have thought of but it’s too late. None of it is rocket science but it has the potential to blow up. Worse still, those little errors and nuances can simply just sit there, ticking, almost unnoticed, until they go off and potentially cost the business financially.

“If only our ‘tenant clients’ would get bespoke property advice, it would be so much quicker and easier for us – and cheaper for the client; not only that, the client would get a better deal!”

Well, that is where I come in. Bespoke property advice that could save your business valuable time and money.