Office relocation transaction and set up costs

IT and telecoms will form a major part of the fit out costs. Consider employing an experienced IT and telecoms consultant to ensure that your hardware, software and networking objectives are met cost effectively. We recommend you develop an IT strategy at an early stage, in particular you need to consider the location of your comms room and its cooling requirements. If your telecoms provider does not already have services installed in the premises / building you may require a wayleave agreement, under which the landlord permits the installation. Consider if secondary or dedicated lines are required for security or redundancy purposes. Be aware of delays associated with wayleaves (covered in more detail later).

There are few more emotive elements to a fit out than the selection of new furniture. You may want to consider picking a fit out partner with its own furniture division. Where budgets allow, do not just go for the cheapest option. Consider whether furniture rental is a suitable solution – lease financing may achieve tax efficiencies. Also, don’t forget to assess what can be re-used from your existing premises.

SDLT (Stamp Duty Land Tax in England) or LLT (Land Transaction Tax in Wales) is payable by a tenant on the grant of a lease. There is a complex formula used by the tax authorities to calculate the amount due, based on the rent payable and the lease term. You should seek confirmation of what this figure will be at the outset and when it will be payable (especially if you intend to occupy a major part of the premises prior to lease completion). Typically, the longer the lease and higher the rent, the greater the tax due.

If your lease meets certain criteria, principally being for a term of more than 7 years, then you will be required to register it at the Land Registry. This will attract a fee based on the rent. Even where the lease is not registerable, your lawyer should note your lease against the landlord’s title at the Land Registry, to protect your interests.

Fees should be agreed in writing with your chosen professional team at the time of their instruction. The main fees you will need to budget for are those of your agent, fit out contractor and lawyer. Make sure you are clear as to when these payments will become due.

As well as being another legal document to review and negotiate, placing significant funds on deposit with the landlord can be a serious cash flow burden for businesses. If unavoidable, consider seeking a profits test, where the deposit will be returned to you when the business can demonstrate a pre-agreed level of profit over a period of time.

The lease of your old premises is likely to require you to return the premises to the landlord in good repair and to reinstate alterations. If you have not decided to carry out the required reinstatement works (as is common) then the cost and liability for these works is usually settled by what is known as a dilapidations payment to the landlord. The subject of dilapidations is complex and notoriously contentious, so it is crucial that you work closely with your agent and lawyer to develop an exit strategy and ensure that you are absolutely clear about your responsibilities and liabilities.