By Steven Petty of Cousins Business Law
Premises are among a business’s biggest overheads.
It makes sense to periodically review the costs and identify ways to reduce them.
This article provides 10 tips for reducing costs associated with your premises. Taken together you could reduce cash flow pressures as well as put yourself on a firm footing for securing property bargains in the future.
- If you are about to move premises, particularly in the office sector, take a short-term lease rather than buying. Prices in commercial property fell throughout 2009 and it looks as though you should still be able to pick up some real bargains well into 2010. Taking premises on a short lease leaves you clear to take advantage of any deals that you spot.
- Negotiate hard for concessions for any new lease. Rent-free periods of six months or longer are common when the commercial property market is tough.
- Renegotiate your existing lease. Ask your landlord if you can pay rent monthly rather than quarterly. This will provide you with cash flow advantages. This approach is being adopted by major high street chains with some success. It’s better for a landlord to have some cash coming in than a defaulting tenant.
- Transfer existing premises into your pension fund. If you’ve built up a cash-rich fund then it may be worth selling any premises you own to the fund and leasing them back to the business. This will release valuable cash for the business to use. Before taking any such steps get expert advice on taxation and other consequences from a financial advisor specialising in pensions-held property.
- Negotiate open-market option agreements. Whether you're looking to secure business premises or buy a development site, the best policy in a falling market is to negotiate the right to buy the premises at some point at the open market price at the time. This secures the property but saves you having to guess now how much further the market will fall.
- Use any lease renewal periods to take advantage of falling rents. Rent reviews are still almost always ‘upwards only’ but when a lease is renewed it’s your best opportunity to renegotiate and get a lower rent. Make sure you take control of the renewal process to achieve this.
- If you are a landlord or business owner with empty business premises make sure you adopt all available strategies to avoid business rates on that property.
- Take advantage of tax breaks such as the Business Property Renovation Allowance.
- Minimise your initial Stamp Duty Land Tax liability on new leases by agreeing a shorter term with an option to renew.
- Explore the option of renting out surplus space in your premises. Websites such as wantdontwantspace.com offer a marketplace for surplus space.
