Property for a growing business
21st March, 2014
All growing businesses have different property requirements, yet with the right advice and support, their opportunities can be maximised.
Most fast growing businesses demand flexibility, but where the business currently sits within its cycle may determine availability and risks.
Premises can be of crucial importance to the ongoing success of fast-growing businesses.
Some factors to consider include location, type, ownership, restrictions on use, value and associated legal risks.
If a business already owns existing premises it could consider a sale and leaseback, which could realise new capital to invest into the business and react to demand.
Many businesses take premises from third party owners, whether by way of informal sharing, short term serviced accommodation, licences or more formal leases.
Documenting these arrangements correctly is essential to guarantee the required flexibility. Leaving this to chance can carry great risks.
You could negotiate terms at the outset to include early termination in certain circumstances or at certain intervals.
Break arrangements often have pre-conditions to be satisfied in full before the break can happen. Get it wrong and the financial and operational costs can be severe.
Consider capping payments for services and including the ability to deal with your property interest (e.g. sell/lease/share) ensuring it permits your current and anticipated use.
Make sure you understand the legal ownership of the buildings and whether consents may be required – these can be tricky, costly and /or time-consuming.
A cost-effective way to secure future additional space that might not be needed immediately is to agree an option agreement or pre-emption with the owner/landlord over currently vacant areas to allow for future expansion.
With this priority, you could move quickly should a third party become interested.
You will need to decide whether to fix the terms of occupation at the outset. Will you agree those in advance to offer certainty or wait and agree them at the time?
Property arrangements need to be consistent with any funding and operational agreements of the business to avoid scenarios which may restrict or incur costs.
Have an expert reconcile these at the outset.
* For further information on the issues raised by this article, please contact Andrew Dunn.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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