Property Management
At its basic level property management for any business involves maintaining its premises to appropriate standards so that the business can be run effectively and efficiently whilst providing the right environment for customers and employees. Health and Safety issues obviously feature prominently in such management.
The occupier of business premises has a duty to take care that the premises are safe for visitors such as customers and salespersons. Failure to do so could result in a claim for negligence. As well as taking out appropriate insurance cover, the proper maintenance of the premises should be under regular review. With leaseholds it is important to notify the landlord of any defects for which he is responsible as well as undertaking those for which the tenant has liability.
If you are responsible for repairing and maintaining all or any part of non-domestic premises, or if you control such premises, then you will have a duty to manage the risk from asbestos. (Regulation 4 of the Control of Asbestos At Work Regs. 2002) Click here for more information.
If you want to make structural alterations to the property it is important to check if planning permission and/or building regulations approval is required. Also, if the premises are leasehold, you should establish what permissions are needed from your landlords. Remember too that if any proposed alterations might affect neighbouring properties then you should seek professional advice on the Party Wall etc. Act 1996 and the Access to Neighbouring Land Act 1992.
Planning permission may also be required if you want to install a new sign system or a system that is illuminated or is different from an existing system. Always check the position with the local planning authority.
If you want to place an advertising board on your forecourt or use other external signage then you may be subject to the Town & Country Planning (Control of Advertisements) (England) Regulations 2007. Get a guidance booklet from your local authority.
With effect from October 2004, Convenience Store Retailers, along with all other service providers, have to make “reasonable adjustments” to the physical features of their premises to overcome physical barriers to access. Physical features can mean anything in the store from the entrance to the checkout. (Disability Discriminations Act 1995.) For guidelines and further information, contact the Helpline. (See also Customer Service.)
It is a criminal offence for landowners to allow unlicensed wheel clampers to operate on their premises and unlicensed clampers can face fines and/or imprisonment. Any business that uses its own employees to clamp vehicles must ensure that those employees are duly licensed.
For good property management and to ensure that you have the maximum information available to you when you need to seek professional advice you should hold copies of such of the following as relate to your property:
· Land /Charge Certificate/Title Information Document or office copies of entries on the Register at H M Land Registry (for freeholds or leases of more than seven years.)
· Leases
· Licences for Assignments, Underlettings etc
· Rent Review Memos
· Planning permission and Bye-law consents
· Energy Performance Certificates (EPCs)
· Service Charge accounts
· Insurance policies
· Rate Demands
· Survey Reports
· Replies to pre-contract enquiries when you purchased
Note that since 1 October 2008 an Energy Performance Certificate (EPC) must be provided for any commercial property sold or rented out.
Some of the above will have been provided by your Solicitors when you purchased. At the same time you might also have received from them their written “report on title”. If so this should also be retained with your papers.
FREEHOLDS
Unless finance is not an issue many small and medium sized businesses have preferred traditionally to lease rather than have capital tied up in property. In addition, of course, suitable sites are often not available to purchase freehold and only the leasehold route is open.
Where the freehold is owned there may well be a mortgage and traditionally the deeds have been held by a bank or other lender. However with the advent of e-conveyancing there is a gradual move by lenders to require original deeds and documents to be sent to borrowers for safekeeping. In such event it is most important that they are kept safe but readily accessible.
As a freeholder you will not have the same restraints and conditions imposed as in the case of Leaseholds but some freeholds are subject to restrictive covenants of which you should be aware. Your solicitor will have pointed out any such matters to you when you purchased.
Sale and leaseback of freehold property can be a very efficient way of raising finance and many large organisations engage in the practice. As a small or medium sized business it is well worth seeking professional advice in your particular circumstances.
LEASEHOLDS
With many leases now comprising 60 or 70 pages it is not surprising that most lay-people rely almost entirely on their solicitor to ensure that they are not entering into a “dangerous liaison “ with a landlord. Depending on all the circumstances, including whether you are taking a new lease or an existing one, you may be in a position to reject any particularly onerous terms or covenants. Your solicitors should point out any such obligations and you should discuss with them the chances of having them modified or removed altogether.
Try to read and understand the whole of the Lease and seek the advice of your solicitors when you come up against matters that are not clear, as undoubtedly you will.
Some matters can have very substantial implications and these include:
(1) Ensuring the premises are clearly defined, either by reference to a plan or a description that shows exactly what you are getting.
(2) Access to premises defined and, where appropriate, rights of way granted over adjoining property.
(3) The term of the Lease (and commencement date). Is your right to seek an extension of the term excluded (not usual).
(4) The current rent and future review dates.
(5) Insurance liabilities
(6) Service charges
(7) The permitted use of the premises and whether there are any restrictions relating to your particular business.
(8) Repairing obligations. Is it a full repairing covenant or is your liability limited to specific matters.
(9) Restrictions on assigning or under-letting the lease. For example an outright prohibition against assignment of the whole should be resisted except in very special circumstances.
(10) Ensure the landlord covenants to allow you “quiet enjoyment” of the premises and to insure if its his liability.
(11) If you lease as a limited company try to avoid personal guarantees by directors.
As a tenant you have the right to seek a new lease before the end of the current term (unless the landlord has expressly excluded this right in your current lease). If you fail to apply for a new lease your tenancy will continue under the provisions of the Landlord and Tenant Act 1954 on the same terms and conditions as the “expired lease” until terminated by notice given by you or by the Landlord. Consult your solicitors to take appropriate action.
If notice is given by the landlord the tenant can serve a counter notice claiming a new lease on terms to be agreed, including a new rent. The latter is usually negotiated by the parties' surveyors/valuers. The landlord can only refuse to grant a new tenancy on certain limited grounds ( e.g. re-development)
Since October 2003 all leases of 7 years or more (or with 7 years or more to run at the time of any transfer) are required to be registered at H.M Land Registry.
Land Certificates are no longer issued but the Registry provides a “Title Information Document”. As the name implies this document is not evidence of Title but purely for information purposes.
Any document sent to the Land Registry is potentially open to inspection by the public and this can only be avoided if it is made an “exempt information document” (E.I.D). This is possible if the applicant can persuade the Registry that the document contains “prejudicial information”, particularly if it would “prejudice the commercial interests of the applicant”.
As from December 2003 new leases are liable to Stamp Duty Land Tax. This will result in substantial increases in duty payable on some longer leases of large commercial properties but many of those for shorter terms and/or at lower rents could well be exempt.
For Leaseholds, whether you just have one or many it makes sense to prepare a schedule setting out important detail such as:
· Date of Lease
· Term
· Commencement
· Current Rent
· Next review
· Service charges
· Insurance
· Repairs
· Expiry date
Obviously you should develop the schedule to suit your own needs and to ensure that vital dates are not missed.
Code for Leasing Business Premises
On the 28 March 2007 a consortium of business, property, finance and legal organisations published the updated Code for Leasing Business Premises. The easy to follow guide will help ensure that businesses avoid the possible pitfalls of lease agreements and that landlords operate to a pan-industry agreed standard.
The government endorsed code was unveiled by communities minister Yvette Cooper, with a number of radical changes from the 2002 edition. These include:
- Landlords should, on request, price alternative rent review terms on a risk-adjusted basis, rather than providing a menu
- Preconditions on break clauses are significantly restricted
- If subletting is allowed, it should be at the market rent
- At the time of negotiating the lease landlords must disclose known irregular events that would have a significant impact on the amount of future service charges
- Unless expressly stated in the heads of terms, tenants should only be obliged to give the premises back at the end of their lease in the same condition as they were in at its grant.
The new code offers three documents to improve leasing practice:
- A far more focussed and therefore succinct two-page landlords' code
- A step-by-step guide for tenants
- A heads of terms checklist, which all parties and their agents and solicitors can use during lease negotiations
- It will be of particular help to small businesses, highlighting both the opportunities and problems of commercial leases. It will also ensure that landlords, particularly small landlords, follow the best practice agreed across the industry.
Commenting on the launch, Philip Freedman CBE, chairman of the Code Steering Group, said:
"Hundreds of hours have gone into the production of these three documents, but it will be all for nothing if we do not get them into the right hands at the right time. I strongly therefore urge prospective tenants, their agents, solicitors, bankers and accountants to ask for Code compliancy when negotiating a lease, and landlords and their representatives to volunteer it.
"The Code remains voluntary, but several organisations will be taking steps to embed it within their self-regulatory structures. This third edition represents a wake up call: tenants, particularly, SMEs, should ensure they are better informed about leases they are considering; and, landlords should ensure that they are providing terms which are transparent and fair."
COMMONHOLDS
This system introduced by Part I of the Commonhold and Leasehold Reform Act 2002 and in force from September 2004, is a new way of owning registered land and is said to resolve certain problems endemic in the leasehold system. Whether or not it will become a widespread process remains to be seen and anyone considering buying commonhold will need to seek detailed professional advice.
All PBS information sheets are designed to provide the detail you need to implement best business and employment practices. They are not a detailed commentary on the current law and where advice is needed in a specific case you should contact PBS for expert consultation.
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