Choosing suitable premises to cater for your food business
12 August 2022
Whether you are choosing to buy a commercial property or lease a building or part of one, the property you select must be fit for your food business. Buying a property or taking a lease is a big commitment, so it is imperative that it not only caters for your needs now, but also allows for the future development of your business. Complying with all relevant regulations applicable to your food business is essential and so you will need to ensure the property you choose is appropriate.
Below are some factors to consider before making a decision
- Buying or leasing a property .
The decision as to whether to buy or lease your food business premises is determined by several factors, most importantly, your business requirements and affordability. If you are a new business, you may prefer to lease as this will not require the capital upfront. Leasing a property will give you more flexibility with cash flow and time to understand your food business requirements without the commitment of owning a property. However, purchasing a property would give you more freedom to use the property as you wish as you wouldn’t be bound by the usual list of covenants, obligations and duties owed to a landlord. With the purchase of a property, you may need to consider raising capital, and you may need to arrange for a lender to support the investment. Ultimately, location and availability of properties will be critical factors in your decision to buy or lease.
- Leasing a property
If you decide to lease a property, you’ll want to keep in mind a few additional points:
a. Exit Strategy
Although the exit strategy may not be high on your agenda when contemplating entering a lease, it is essential you are aware of your options. You may consider that an option to break the lease early would be beneficial to you if, for example, you have concerns about whether the property might be too big, or too small, for your business requirements. Any option to break contained in a lease is likely to be subject to conditions. These conditions could include how much notice a tenant is required to give to exercise the break, whether any payment to the landlord is required or if there are any rent arrears or other breaches which may stop you from being able to exercise the option. You should ensure any break conditions are fair and achievable. It is worthwhile ensuring the lease can be assigned (capable of being transferred to a new tenant for the remaining lease term) or underlet (granting a new lease to your own tenant) as this will give you more flexibility. These terms often come with a variety of requirements the tenant will be required to comply with.
The tenant will likely be responsible for the repair of the property and any plant and machinery within it. There are varying degrees of responsibility in respect of repair. Notably, the repair obligation may require the tenant to put the property in a better condition than it was when the lease was entered into. This full repairing liability can be qualified by a photographic schedule of condition which would not require the tenant to put the property in any better state of repair than shown in the schedule, at the end of the term. If you are leasing part of a building, your repair liability may include only the internal parts of the building, and the landlord may be responsible for the exterior and structure of the building. In this instance, the cost of the landlord repairing and maintaining such parts may be recharged to the tenant via a service charge arrangement.
c. Compliance with regulations
You will need to ensure that you can comply with regulations concerning your food business. This includes complying with the Food Safety Act 1990, Food Information Regulation and general food law relating to food imports and exports, safety, traceability, labelling and product withdrawals and recalls. You may need to apply for licences, including (but not limited to) food premises approval, food business registration and discharge of trade effluent etc.
- Buying a property
If you decide to buy a commercial property, below are some factors to consider:
a. Type of property
You will need to decide on the type of property to buy. It may be that the property is already fit for purpose so no redevelopment or change of use will be needed. If however, the property/land needs developing to fit your food business needs you will want to enlist the help of a professional team to assist you in the development/planning requirements.
How you decide to fund the purchase is an important consideration. If you have the capital then you can purchase the property with those funds. However, you may not necessarily want to tie the capital up in the property or you may need to raise capital for the purchase and this is done with the assistance of a lender. It is advisable to have conversations with banks or funders at an early stage.
- Practical considerations
You will need to ensure you comply with fire safety duties in accordance with the Regulatory Reform (Fire Safety) Order 2005, which includes carrying out an assessment of the property’s fire risks, keeping the assessment under review and maintaining fire-fighting equipment. Ultimately, you will need to take precautions to protect anyone at the property, including staff and customers in relation to fire safety.
Compliance with health and safety is important, and a health and safety risk assessment must be carried out with details on how you will remove any risks. Do note that if you are leasing only part of the building, the landlord may be responsible for health and safety of any retained areas.
In essence, you need to ensure the premises allows you to prepare food safely and follow food hygiene practices (including protection against containment and pest control), or you can alter or fit out the premises in order to achieve this. If you are taking a premises lease, most leases require the landlord’s consent before any alterations or fit out before operating the property. The landlord may impose conditions on any alterations, which will most likely require you to reinstate the property and remove the works before the end of the lease term.
Should you have any queries in relation to your food premises please contact Rebecca Bond.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at August 2022.