Property
Commercial Property is an important issue for all retailers. Deciding whether to lease or purchase a freehold premise can be daunting for the less experienced business owner. Once a decision is made either way the whole process can become extremely complicated, with many aspects such as raising finance, solving planning issues and working out business rates requiring specialist advice from professionals.
Once a premise is secured and the store is open and trading, the emphasis turns to maintaining the premise in good working order according to the terms of the lease and managing issues such as rent reviews.
When the time comes to dispose of the premise and/or the business, a different set of circumstances arises. These will include dealing with commercial property and business transfer agents and obtaining energy performance certificates.
The advice in this section will provide answers and guidance in these specialist areas along with links to further information on a wide range of commercial property issues and problems.
Click below to read the advice guides:
Rent Reviews
There are a number of key issues if you are renting premises, including how to rent a property, the different types of rental available your responsibilities as a tenant. Business Link's website has information for businesses on what you need to consider before deciding whether to rent a property and what your responsibilities are.
Rent Reviews take place to re-evaluate the amount of rent that should be paid on a premises, and often occur every three to five years, although could happen at much shorter intervals. There are a number of different approaches to rent reviews. This may include a fixed rental increases over a certain period, or indexed rent where the rental increases depending on an a different factor, such as changes in the Retail Price Index (RPI)
It is important to ensure that you are paying fair rent on your property, and that a review is conducted properly. There are a number of issues which you should take into account when your review is taking place, and before you sign a contract, for example if the reviews will be ‘upward only’ so that even if rental values should fall yours may still rise. Also you may want to consider asking for break clauses to be introduced to allow you to assess whether you want to continue renting. For more information on these issues visit the Business Link website.
The British Property Foundation has a code of conduct for renting, including rent reviews.
Business Rates
Non-domestic premises are subject to Business Rates. Premises are given a ‘rateable value’ which is based on an assessment of the annual rent of a property if it was available to rent on the open market at a fixed evaluation date. The rateable value is then multiplied by a factor set by central government each year.
Only the local authority can calculate your rates liability and this is normally sent to you sometime between February and April.
For further information on business rates you can visit My Business Rates' website.
Business Rate Deferral Scheme 2009/10
On 31 March 2009, the Government announced that it would regulate to allow businesses to defer part of their payment of the 2009/10 Business Rates. The Non-Domestic Rating (Deferred Payments) (England) Regulations 2009 were laid before Parliament on 6 July 2009 and came into force on 31 July 2009.
These new regulations mean that businesses may be able to spread the payment of the increase in their 2009/10 Business Rates bills over a three year period.
If your bill has increased as a result of the end of the current transitional relief period, you may be able to defer 60% of this increase in your bill. If you did not qualify for transitional relief in 2008/9, then you can still defer 3% of your total 2009/10 bill.
You can apply at any time until 31 March 2010 provided you have some of your bill left to pay. We would encourage you to apply early. If you have less than 3% left to pay, you can defer your remaining balance.
Depending on when your application is made, the reduction in your payments should be reflected in either your next instalment or, at the latest, in the one following that. The amount you can defer will not change in either case.
To apply to defer the business rate increase contact your local authority.
Small Business Rate Relief
Retailers in England can apply small business rate relief. If your rateable value is less than £5,000 you are able to claim 50% rate relief. This relief decreases on a sliding scale by 1% for every £100 of rateable value over £5,000, up to £10,000. Your local billing authority will calculate the exact decrease.
In addition to this relief on liability, eligible businesses with rateable values of between £10,000 and £14,999 (or between £10,000 and £21,499 in London) will have their liability calculated using the small business rate, which is set by central government.
More information on small business rate relief and other types of relief, including where your premises is in a rural area with a population of less than 3000 can be found here.
Scotland
On April 1 2009 the Scottish Parliament rolled out its Small Business Bonus Scheme. If you pay non-domestic rates for properties with a combined rateable value of £15,000 or less then you will be eligible for the relief. The rate relief comes on a sliding scale;
Combined Rateable value of all business properties in Scotland Percentage relief available
Up to £8,000 - 100%
£8,001 to £10,000 - 50%
£10,001 to £15,000 - 25%
You must apply for the bonus Scheme, for an application form contact your local authority.
The application form should only take a few minutes to complete and you only need supply the name of the business, the address and the rateable value.
When calling your local authority ask to speak to the revenue or non-domestic rates section and ask for a Small Business Bonus Scheme application form. Many local authorities also have forms available to download online.
Your local authority can also advise about eligibility if you have more than one business property and interaction with other non-domestic rate relief’s.
Wales
Since April 2007 businesses in Wales have been able to access rate relief. Under the scheme, businesses with a rateable value up to £2000 receive a 50% reduction in their rates, while businesses with a rateable value between £2,001 and £5,000 receive a 25% reduction. It will be applied automatically to rates bills, so there is no need for business to apply.
In addition, there is an enhanced relief for Post Offices in all parts of Wales. Post Offices with a rateable value up to £9,000 will receive 100% relief, and those with a rateable value between £9,001 and £12,000 will receive 50% relief.
Northern Ireland
In Northern Ireland, there is a hardship relief scheme for small businesses. Hardship relief provides support to businesses in crisis because of exceptional circumstances or unforeseen events that may have affected the business badly and which could not be avoided. The scheme removes the need to pay rates during that time.
Supplementary Business Rate
Businesses in the UK currently pay national business rates set according to the ‘rateable value’ of the business property and a ‘multiplier’ set by central government. In his Pre-Budget Report to the House of Commons, the Chancellor Alistair Darling confirmed that local authorities would be permitted to levy an additional supplementary business rate of up to two pence in the pound, in order to raise revenue for local projects. The Government believes it will “enable local communities to take decisions about how to use local funds” and “ensure that local priorities are being met.”
From 2010 upper-tier local authorities as well as the Greater London Authority will be able to levy the rate on any business within their jurisdiction. Properties liable for business rates but with a rateable value of less than £50,000 will be exempt from the Supplementary Business Rate (SBR). The revenue generated from the SBR will be locally raised and retained and it will only be able to be used on economic development such as infrastructure. Already the London Mayor Ken Livingstone has expressed his desire to levy the SBR in order to raise funds for the Crossrail project.
Where revenue from the SBR will fund more than a third of the costs of a particular project, then the businesses which pay the SBR will be able to vote on the project and the use of their funds.
Use Classes
All buildings are sorted by the Town and Country Planning Order 1987, into specific use classes. They are divided into ‘Classes’ which pertain to A, B, C, D and ‘Sui Generis’ (of its own type) and then further sorted into ‘Orders.’ Therefore A1 and A2 are different orders, but they are the same class.
The Orders are as follows;
• A1 Shops - Shops, retail warehouses, hairdressers, undertakers, travel and ticket agencies, post offices, pet shops, sandwich bars, showrooms, domestic hire shops, dry cleaners and funeral directors.
• A2 Financial and professional services - Banks, building societies, estate and employment agencies, professional and financial services and betting offices.
• A3 Restaurants and cafés - For the sale of food and drink for consumption on the premises – restaurants, snack bars and cafes.
• A4 Drinking establishments - Public houses, wine bars or other drinking establishments (but not night clubs).
• A5 Hot food takeaways - For the sale of hot food for consumption off the premises.
• B1 Business - Offices, research and development, light industry appropriate in a residential area.
• B2 General industrial
• B3-B7 Special Industrial Groups - See 'Use Classes Schedule'.
• B8 Storage or distribution - This class includes open air storage.
• C1 Hotels - Hotels, boarding and guest houses where no significant element of care is provided.
• C2 Residential institutions - Residential care homes, hospitals, nursing homes, boarding schools, residential colleges and training centres.
• C2A Secure Residential Institution - Use for a provision of secure residential accommodation, including use as a prison, young offenders institution, detention centre, secure training centre, custody centre, short term holding centre, secure hospital, secure local authority accommodation or use as a military barracks.
• C3 Dwelling houses - Family houses, or houses occupied by up to six residents living together as a single household, including a household where care is provided for residents.
• D1 Non-residential institutions - Clinics, health centres, crèches, day nurseries, day centres, schools, art galleries, museums, libraries, halls, places of worship, church halls, law court. Non residential education and training centres.
• D2 Assembly and leisure - Cinemas, music and concert halls, bingo and dance halls (but not night clubs), swimming baths, skating rinks, gymnasiums or sports arenas (except for motor sports, or where firearms are used).
• Sui Generis - Theatres, houses in multiple paying occupation, hostels providing no significant element of care, scrap yards. Petrol filling stations and shops selling and/or displaying motor vehicles. Retail warehouse clubs, nightclubs, launderettes, taxi businesses, amusement centres, casinos.
Change of Use
A change of use within the same class (A1) does not represent ‘development’ and therefore does not require planning permission. Changes between classes and orders do require planning permission. However under the ‘General Permitted Development Order’ (GPDO) there are certain changes between classes which are permitted without planning permission. These are as follows;
|
From |
To |
|
A2 (professional and financial services) when premises have a display window at ground level |
A1 (shop) |
|
A3 (restaurants and cafes) |
A1 or A2 |
|
A4 (drinking establishments) |
A1 or A2 or A3 |
|
A5 (hot food takeaways) |
A1 or A2 or A3 |
|
B1 (business) (permission limited to 235 square metres of floor space in the building) |
B8 (storage and distribution) |
|
B2 (general industrial) |
B1 (business) |
|
B2 (general industrial) (permission limited to 235 square metres of floor space in the building) |
B8 (storage and distribution) |
|
B8 (storage and distribution) (permission limited to 235 square metres of floor space in the building) |
B1 (business) |
Any changes outside of the Use Class as well as structural changes do require planning permission.
‘Sui Generis’ does not represent a single class; rather each building type represents its own class. Therefore every change to buildings within this type requires planning permission.
If you have an area above your shop which you wish to convert into a residential flat, this is also possible provided that;
• The space is in the same class of use as the shop or office to start with;
• The space is not in a separate planning unit from the shop;
• You will not change the outside appearance of the building;
• If there is a display window at ground floor level, you will not incorporate any of the ground floor into the flat.
For more information on Use Classes and change of use, see the British Planning Portal.
Energy Performance Certificates
From 1st October 2008, all commercial properties in the UK must have an Energy Performance Certificate (EPC) upon the construction, sale, let, and in some cases, modification of the property.
All retail premises are included in the legislation.
Exclusions include buildings that are due to be demolished, temporary buildings with a planned usage time of less than two years, lease renewals and extensions, acquisitions, compulsory purchase orders and lease surrenders.
Responsibility for the enforcement of the law in newly built properties will fall to Building Control, whilst Trading Standards departments will enforce certification of existing buildings, with fines ranging from £500 to £5000 for non compliance.
An Energy Performance Certificate (EPC) is intended to inform potential buyers or tenants about the energy performance of a building, so they can consider energy efficiency as part of their investment or business decision to buy or occupy that building.
The EPC looks broadly similar to the energy labels now provided with vehicles and many appliances. Its purpose is to indicate how energy efficient a building is. The certificate will provide an energy rating of the building from A to G, where A is very efficient and G is the least efficient. Your building’s energy performance will be indicated as a carbon dioxide based index.
The cost of the survey will vary according to the size and complexity of the premises. It should cost between £200 to £600 per premises. However this is only a rough guide only.
If you require further help with obtaining an EPC ring ACS on 01252 515001 and we can refer you to our expert who will give you the right advice for your specific needs.
Planning Applications
A guide for small businesses in dealing with planning applications, information on how to apply and useful tools is available on Planning Portal's website.
The Planning System Any business looking to extend its premises, build a new premises or convert an existing building to suit its purposes may at some point come into contact with the planning system.
An important starting point is to find out who your Local Planning Authority is and how to contact them. You can do this by using the Planning Portal’s finder.
What development can take place – and where – is governed by guidance, strategies and plans drawn up by local, regional and central government, through Regional Spatial Strategies and Local Development Frameworks (LDFs). LDFs set out how an area is likely to change over the coming years, and what types of development can take place where, for example where new retail development should go.
Most new buildings, major alterations to existing buildings or changes of use to existing land or buildings need consent - known as planning permission.
Each application for planning permission is made to the local planning authority for the area. Pre-application talks with your local authority can be a useful way of establishing what information is needed to support your application and how long the process is likely to take. Some local authorities will charge for pre-application discussions but this will depend on the size and complexity of the application being made.
There is a charge for submitting a planning application, to help cover the local planning authority's costs in processing it. There is a scale of fees with higher charges for applications for major development. Is planning permission needed? You do not always need planning permission. It is not generally required for internal building works, or for small alterations to the outside such as installing telephone connections and alarm boxes. Other small changes, for example putting up boundary walls and fences below a certain height, have a general planning permission for which a specific application is not needed.
Planning permission is often necessary to change the way that land or buildings are used. The Town and Country Planning (Use Classes) Order 1987 (as amended) puts uses of land and buildings into various categories.
These categories group uses which have a similar land use impact, so where the change of use would not materially change the impact there is no need for planning permission. For example changing a restaurant to a shop will not require planning permission but changing a car showroom to a shop will. There is more information aboutUse Classes here. If in doubt ask your local planning authority for advice.
It is not always necessary to make the planning application yourself, you can appoint an agent (for example an architect, a planning consultant or a builder) to do it for you.
Applying for planning permission
There are a number of ways to apply for planning permission. Forms are available from your local authority planning offices and often their websites.
Broadly speaking, there are two main kinds of application:
Outline
For a new building, you may be able to make an outline application to find out whether the development is acceptable in principle. This usually means that detailed drawings are not needed. However, the council can require additional information, or insist that a particular application be made as a full application.
If outline permission is granted, you will need to get approval of the details (known as ‘reserved matters’) before work can start. These comprise citing, design, external appearance, means of access and landscaping. What you propose must be consistent with the outline permission. If your proposal changes, you may be asked to start again with a fresh application.
Full
A full planning application requires the submission of all details of the proposal. It would be appropriate if you wish to change the use of land or buildings, or if you want to start work quickly.
You can use the Planning Portal’s online service to find out what sort of planning permission you need and apply for it online.
Apply for planning permission online.