Telling the truth about SME life today

Office Moving Costs

Office moving costs regularly become the highest in-year spend, as well as become a major upheaval. Depending upon the business size, such moves may be done internally and with the hire of a van or two or using a professional company. Such companies can often have hidden costs and these need careful planning and review before the start. The balance of business disruption and costs need full consideration before the button is pushed and the move starts.

 

 

In this article, we highlight major office moving costs that are often overlooked:

 

1. Stamp duty

Cost: Variable.

Stamp Duty Land Tax (SDLT) is charged on land and property transactions in the UK. If your business is purchasing the new build it is likely it will have this fairly well-known tax to consider. The tax is charged at different rates and has different thresholds for different types of property and different values of transaction. Other factors within a lease (such as incentives) have a bearing on the level of SDLT due

 

2. Landlord’s approval for alterations

Cost: Estimated between £750 – £3,000.

In a majority of cases, before a tenant may undertake any non-structural alterations to their office space, they must receive formal consent from their landlord for such works. A “License for Alterations” is then appended to the lease once the landlord approves all plans for alterations.

 

3. Dilapidations

Cost: Estimated between £5 – £20 per sq ft of the net floor area.

A tenant’s repairing obligations under either an FRI or an IRI lease are often referred to as dilapidations. In simple terms, this involves the tenant reinstating their office back to the exact condition that it was in when their lease was first completed. The office moving cost needs to be considered as an exit payment from the old office.

 

4. Service charge increases

Cost: Estimated increases between five and ten per cent per annum year on year.

The running and repairing costs or “service charge” of any building are subject to annual review and can actually go up, or down.

 

5. Refurbishment / Fit-out costs

Cost: Estimated between £15 – £65 per sq ft of the net floor area.

A variable cost entirely dependent on the needs of an individual business and the level of quality that they require from their office design/fit-out.

 

6. Survey of the premises

Cost: £750 to £5,000, dependent on size and condition of premises.

A building survey is recommended to assess the structural integrity and services of the building. A survey is particularly necessary if the lease will be a fully repairing and insuring one (FRI). Any issues that the survey brings to light will then need to be dealt with in advance of the lease completing by the tenant’s representatives and advisors.

 

7. Schedule of Conditions (where appropriate)

Cost: £1,000 to £2,000.

If the condition of an office at the start of a new lease is anything other than fully refurbished, then that condition should be documented by a series of photographs with written commentary against them. This Schedule of Conditions needs to be agreed by both tenant and landlord and appended to the lease before its completion.

 

8. Superior landlord’s consent to approve sub-let / assignment of a lease

Cost: £500 to £3,500.

Any subletting or assignment of a part or entire demise/lease requires the consent of the superior landlord before it can legally complete. The superior landlord usually has an obligation to not unreasonably withhold or delay their consent, providing that any potential restrictions regarding subletting or assigning within the head-lease have been met and adhered to.

 

9. Rent reviews (every five years based on a new lease)

Cost: Dependent on market conditions. 

Leases that extend beyond five years will usually be subject to a rent review every five years. This applies to both new leases and to subleases. At the time of review, advisors to the landlord will inform them of relevant evidence about available and completed deals on offices in comparable buildings.

 

10. VAT

Cost: Payable on rent, service charge and deposit (where applicable) for VAT registered buildings at a current rate of 20 per cent.

The great majority of buildings in the UK are elected for VAT. In certain cases a landlord may wish to not elect their building for VAT, usually to make their building more appealing to occupiers that are unable to recover VAT. Buildings located in the EC3 postcode of London are the most relevant example, due to the larger number of commercial occupiers from the financial sector (that are unable to recover VAT) being based here.

 

11. Building’s and terrorism insurance

Cost: Estimated £0.50 to  £1.00 per sq ft.

It is the landlord’s responsibility to insure the building. They are then able to recover these costs from the tenant(s) of the building sometimes in the form of service charges.

 

12. Contents insurance

Cost: Relative to the contents of your office and the insurer.

Arranging insurance for the contents of a specific property is the responsibility of the tenant and covers any losses/damage that may be caused by circumstances such as theft and water damage. This insurance can vary based on the properties in which they are held (location, security etc).

 

13. Rates increases

Non-domestic rateable values were calculated every 5 years through the Valuation Office Agency. Since 2023, this has moved to every 3 years. For the UK, Rateable values can often be found here. The latest rateable values are based on 1 April 2021 valuations, therefore the next will be 1 April 2026.

The business rates payable are derived as a percentage of the Rateable Value (RV) of a building and then scaled against the percentage of occupation within a building that a tenant leases. A multiplier is applied each year, depending upon inflation. For 23/24 this was set at 0.512. So for a £50,000 value, you would be charged £25,600.

 

14. Solicitors’ costs

Cost: Estimated £2,000 to £8,000 (potentially higher depending on size of office and structure of the lease term).

Usual practice in respect of any new lease direct from the freeholder of a building is for the tenant and the landlord involved to cover their own legal fees incurred. It is a point of negotiation over who pays the landlord’s legal and also professional (such as surveyors) costs.

 

15. Acquiring agent’s fees

Cost: Variable.

As with any professional service, it is a simple untruth to term agent’s fees a cost, both landlord and tenant pay their own fees.

 

Trending

Related Stories

Most Read

Trending

If you enjoyed this article,
why not join our newsletter?

We promise only quality content, tailored to suit what our readers like to see!