Workplace Health & Safety

Choose the right business premises for your business

Choosing the right business premises is a key business decision. You want premises that help you operate effectively without excessive costs. At the same time, you want to avoid being tied to premises that might not suit you in the future.

Different options suit different businesses. Working from home is a good option if all you need is a small office space. You can also rent premises or buy a property outright.

This guide explains how to search for business premises that meet your requirements and how to choose the best location for your business. It will also help you establish whether renting, buying or working from home is the best option for you and explain the key legal issues that you need to understand.

Your requirements

Drawing up a list of what you need from your premises is a good way to start your search. This list might include the following points:

size and layout of the premises
structure and appearance, both internally and externally
any special structural requirements, such as high ceilings
facilities and comfort for employees and visitors - including lighting, toilets and kitchen facilities
utilities, such as power and drainage, and any special requirements - for example, three-phase electricity
permission, including planning permission, to use the premises for your type of business
access and parking space - for deliveries or customers, including disabled customers
whether you need the flexibility to alter or expand the premises
whether the premises are suitable for your long-term needs

After drawing up your list of requirements, you may decide that working from home could suit you. However, there are important legal and practical issues you need to take into account.

Your choice of premises will also depend on your budget. Whether you rent or buy, costs can include:

initial purchase costs, including legal costs such as solicitor's fees
initial alterations, fitting out and decoration
any alterations required to meet building, health and safety and fire regulations
ongoing rent and service charges
business rates
continuing maintenance and repairs
building and contents insurance

If your requirements are too specific, you may find that your choice of premises is very limited or you cannot afford them. Think about which requirements are essential and which are desirable, and prioritise them accordingly to make your decision.

Choose the right location for your business premises

Choosing the right location can be something of a balancing act. Ideally, the location should be convenient for your customers, employees and suppliers - without being too expensive.

For shops and other retail businesses, location is of critical importance. Your location must attract customers.

If you rely on passing trade, you want to be in an area where enough people who want your product or service can see you. For example, key cutters are often located in or around train stations. You could also benefit from customers who are attracted by other shops in a shopping centre.

For employees, the best location will be easy to travel to. Good public transport links make it easier for employees who don't live within walking distance. Employees also tend to prefer working somewhere with good local facilities.

You may want to be near suppliers for a quick, flexible service. Deliveries may be easier if there are good road and transport links.

You may not want to be too near your competitors, though clusters of similar businesses sometimes attract more customers. Your neighbours and your location also affect your image.

Location has a major impact on cost. If you need premises in a prime location the extra costs may be justified.

Decide whether to rent your business premises

Renting premises suits many businesses and there are a wide range of commercial premises available.

The advantages of renting depend on exactly what you have agreed with the landlord. With a typical lease, you agree to occupy the premises for a fixed number of years and pay an agreed rent, though the lease may allow the rent to be reviewed periodically. Upfront costs for leasing premises are often relatively low, though you may pay a premium to purchase the lease. Sometimes you may also have to provide a refundable deposit. You should also take into account the legal fees.

However, there are disadvantages. You may have significant maintenance and repair obligations. The lease may include other obligations and restrictions. You may also have difficulties if your needs change and you want to move before the lease ends.

A new revised code of practice has been launched to help promote fairness in commercial leases. Although the code is voluntary, it does contain useful advice that can help you negotiate favourable lease terms if your landlord does not offer a code-compliant lease.

Some properties are available on flexible, short-term licence agreements. A typical licence agreement allows you to rent the premises for minimal upfront costs - typically a refundable deposit equal to one or two months' rent. Although you must keep the premises in good order, you are not responsible for structural repairs.

If you do decide to rent premises, it's important to check exactly what the agreement says. If you are in any doubt, you should take legal advice. You should also be aware that you still have general legal responsibilities, such as looking after the health and safety of employees and visitors to your premises, though these responsibilities may be shared with the landlord. For more information.

Decide whether to buy your business premises

Most small businesses do not have the capital available to purchase their premises outright. Even if you can borrow to finance the purchase, you may feel that you have better uses for your capital.

If you do choose to buy, it can have several advantages:

you control your own premises and can stay there as long as you like
you can choose to occupy the premises yourself, rent them to someone else, or sell them
your costs are relatively fixed, particularly if you have a fixed-rate mortgage, whereas rents can increase significantly over time
you can alter the premises to suit yourself - subject to legal restrictions
over the long term, the value of the property may rise

Against this, you have to weigh the disadvantages. Buying property is an expensive and often time-consuming process, involving significant professional fees and stamp duty. You'll also be responsible for all the maintenance and repairs. If your needs change, selling the property can be difficult and expensive, and you might find that the value has fallen.

You may be able to claim capital allowances towards the cost of renovating or converting your business premises. Since 11 April 2007, businesses in designated disadvantaged areas have been able to claim 100 per cent capital allowances on the costs of renovating or converting business properties that have been vacant for more than one year.

Legal advice is strongly recommended if you are buying premises. You'll also need to be aware of your legal obligations. For example, you'll need to ensure that the premises meet health and safety standards. For more information.

Decide whether you could work from home

If you have the choice, working from home may be a much better option than renting or buying business premises. It's a common choice for people who just need a small office, or who spend most of their time working on client premises.

However, working from home may not be an option if it significantly changes the use of the building, or affects your local area, for example if you have lots of visitors. Also, if you rent your home, your licence or lease may carry restrictions on using it for business purposes.

Drawing up a list of what you need can help you decide whether working from home is a possibility.

Planning the home office

Practical issues you need to think about include properly equipping your workspace. If you work at a desk you need a comfortable workstation. Consider any potential hazards to yourself, workers, visitors and other members of your household and how to reduce the risk of accidental damage to your work or equipment.

You also need to think about how to separate your work and home life. It helps if you can avoid being disturbed when you are working. You also want to be able to relax during your time off without being interrupted by work.

Financial and legal issues

Working from home can have important consequences for your mortgage, insurance and tax position. For example, your mortgage might not allow you to use your home for working, and your insurance might be invalidated if you do. There are also legal considerations, you might need planning permission, or you may become liable to business rates.

Even if you just have a small home office, or work on client premises, you'll need to think about health and safety. You must carry out a health and safety risk assessment, taking into account the kind of work you do and the risks to other people.

Legal considerations when choosing business premises

If you own or occupy business premises, you need to understand the legal obligations and restrictions that affect you. For example:

The premises must have planning permission that allows them to be used for your type of business. For more information.
You must comply with building, fire, and health and safety regulations.
Stamp duty is payable on commercial leases and you are likely to be liable for business rates, though in rented premises these may be paid by the landlord.
You are responsible for the health and safety of employees and visitors.
You also need to provide a suitable working environment.
If you provide goods or services to the public, you must take reasonable steps to make your premises accessible.
You need to comply with the terms of any lease or licence agreement.
For some businesses, you may require a licence to operate or to sell certain products.
There may be restrictions on times when deliveries are allowed, noise and pollution levels, and how you or your customers dispose of waste.

In licensed or leased premises, responsibilities are shared between the landlord and the tenant. For more information.

Whatever premises you choose, you need to ensure that you are properly insured. For more information.

If you are in any doubt about your legal obligations, you should take advice from your business adviser or solicitor.

Search for business premises

It's worth starting by drawing up a specification or "spec", clearly setting out your requirements. Distinguish between what is essential and what is desirable.

You can then circulate this spec to likely sources of premises such as commercial agents who act as estate agents for commercial premises. Local surveyors who can assess the condition and value of premises may know of suitable properties in the area. Your local authority, Business Link, Chamber of Commerce and your trade association may also be able to help.

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