How to make best use of your free office space

The impact of COVID-19 in the property market has been extremely volatile, but working from home has become part of the new normal. As a result, companies will find themselves with surplus office space.

If you occupy business premises under a lease you may consider how to optimise this position. The first port of call will be to look at the provisions of your lease.

Break Clause

If you are exercising a break clause for all or part of your premises, look carefully at the break conditions:

Rent payment – payment in full of all rent due. Check whether this includes service charge payments, insurance and other sums demanded under the lease. Ensure any rent concession negotiated during a lockdown period has been properly documented, otherwise a landlord could argue that there are outstanding payments thus not satisfying the break condition.
No subsisting tenancies and vacant possession – If you have a sub-tenant in place, you will need to ensure they have vacated well in advance of your break date. Where possible, time your break notices such that the sub tenant’s lease comes to an end a few days before your lease, giving you enough time to ensure the premises are fully empty (including rubbish).
Break premium – check whether a premium is due to calculate the cost to your business of exercising this break.
Reinstatement – If alterations have been made, check if they need to be reinstated.
Refunds – you may be entitled to any refund of rent, service charge or insurance rent if your break date does not coincide with a rent payment date. A properly negotiated break clause will have a provision for refund of overpaid sums.
Serving notice – the lease may contain provisions regarding service and the break notice. Our property litigation team are best placed to serve these on your behalf to ensure accurate service.

Negotiate

If you do not have a break clause in your lease, approach your landlord. They may be willing to start marketing for a new tenant early or offer you a temporary rent reduction.

Partial Surrender

If you hold multiple leases, the landlord may accept a surrender of one, subject to payment of a surrender premium. Remember, you cannot surrender part of one lease. A surrender of part is treated for SDLT purposes as a surrender of the whole lease and a regrant of the retained part. This means you would need to pay SDLT (if the rent is sufficiently high to attract SDLT).

On a practical level, if you terminate a lease which contains car parking spaces or a right to use a certain number of spaces, you will also lose those associated spaces unless your landlord can agree a separate arrangement with you. Think about this when considering the number of people who might need this within your office.

Sublet

Consider subletting any unused space if permitted under the terms of your lease as the income will supplement the rent due. Your landlord will usually need to be provided with information about the proposed subtenant and the terms of the sublease before you go ahead. They may also want to have input into the sublease itself.

Your Space

You may also want to think about redesigning your workspace to support your organisational priorities. Landlord’s consent may be required to remove internal partitioning and carry out other improvement works. If you are moving your kitchens and toilets, this may require larger scale works to be done, and an application may need to be made to your landlord for formal consent under a licence to alter.

The future of how office space might be used is uncertain still at this stage but the pandemic has showed us that remote working with the support of technology can be just as productive as in person.

Aditi Sawjani is a Senior Associate in VWV’s Commercial Property team. Aditi specialises in investment, commercial property advice, purchase and sale, and finance.

How to make best use of your free office space

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