Trevor Scott, owner of Rugby Fitted Kitchens, is moving into bigger premises and shares some tips on how to avoid the pitfalls of lease agreements
“This licence is only for two weeks because we’ll have you in your new unit by 18 December.” These were the immortal words spoken by the landlord’s agent as he handed me the keys to the 6,000-square-foot unit.
“You’ll just have to pay the rates for the couple of weeks you’re in occupancy, until your lease has been assigned,” he said with a smile that lacked confidence.
Fast-forward two months and we’ve finally got the keys to the new warehouse and offices. They are still not totally finished – the warehouse roller shutter motor is broken (rendering that means of entry all but redundant until it’s fixed) and the one office that had a decent bit of carpet in it looks like it’s been used to mix cement in. The offices have also not been cleaned, much to the agent’s embarrassment.
Strong negotiating position
So, although we’re in our new unit, it’s under licence because the lease itself won’t be signed now for another week or so.
Yesterday, I took more than 100 pictures to create a photographic record of condition to add to the lease as an appendix. I cannot stress enough the importance of doing this to anyone taking on a new lease. That’s because the last thing you tend to think about during the emotional high and excitement of taking on a new property for your growing business is the tucked-away-near-the-back “dilapidations” clause in your lease.
By having a record of condition taken at the time the property is handed over to you, the landlord can’t then come back at the end of the lease and make excessive and expensive demands that you bring the property back to an “as new” condition, when clearly it wasn’t like that when you moved in. You will find yourself in a stronger negotiating position with this document in place.
I have heard many stories of business owners being stung by this. In our own industry, a well known local small distributor had to wind up his business to escape the clutches his former landlord’s solicitors, who tried to hit him with a dilapidations bill that ran to six figures.
We were now sitting on a large rates bill for the past two months that should have been for the two weeks on the unit lent to us by the landlord – but I managed to persuade them to knock this expense off the first quarter’s reduced rent. At long last, we can start organising the services – telephone, broadband, alarms, etc (all of which should have already been done by now) – move in and start fitting out.
But why do we, a mid-sized local kitchen retailer, need a big new warehouse and offices? After all, it was only four-and-a-half years ago that we relocated from our original 1,500-square-foot showroom with a small warehouse out the back and into our current 4,500-square-foot showroom and warehouse. Surely, we haven’t outgrown that already? Well, the answer is simply – yes.
We didn’t have problems in 2014 because we purchased a 40-foot container to provide overflow storage. Although we were fit to burst from time to time, we coped. But during 2015, as the new Warwick showroom started to do the business, it became clear we needed additional warehousing and, ideally, another office.
Increased warehouse space
Rugby is a distribution hub, which means warehousing space is at a premium and it was a real struggle to find anywhere the right size. We looked at plenty of places but, for all sorts of reasons, none was ideal, until I approached our current landlord to see if it could help us out. As it turned out, it had a 1960s-built, 2,900-square-foot warehouse with an office block attached that was far bigger than we needed and, therefore, hadn’t shown up in our own searches.
Fortunately, the landlord knew this unit would be a struggle to let with such a large office and so had pitched the price at a very affordable level.
The first-floor offices have been mothballed and RFK Contracts will now be taking up residence on the ground floor. So, fingers crossed, I’ll be writing next month’s piece from my new corner office in RFK towers.