There is no doubt that COVID-19 has initiated change in the way we work as well as how we view the use of the office.
As the current Government advice is to work from home if possible, many businesses are considering what the ‘new normal’ will look like and how much office space will be needed in the future.
So what will the new normal look like for office space?
In the short term, many businesses will be looking to adjust the office environment to ensure that social distancing measures can be complied with. This could mean some businesses looking for larger spaces. However in the long term, it is suggested that more businesses will resort to more flexible working and therefore may require less office space.
If you are an occupier, what can you do with your office space?
So if you are looking to downsize your office space what can you do?
- Terminate your lease: This will take place when the contractual term of the lease is coming to an end. Under the lease you may be subject to certain exit obligations and you should review your lease to ensure these are complied with. It is also worth checking if your lease is within the Landlord and Tenant Act 1954 and therefore benefits from security of tenure. If so, and you are in occupation of the property, you will be required to serve 3 months written notice on the Landlord in order to terminate the lease.
- Break options: These will vary from lease to lease and therefore you should check to see what break options are available in your lease. Break options are usually subject to conditions and timescales. If the break option is utilised, it is imperative that any conditions attaching to the break are fully satisfied and complied with as failing to do so will mean the exercise is void.
- Negotiate with your landlord: if the above options are not available, you may wish to negotiate a surrender, or surrender of part, with your landlord. The surrender will only be secured on terms agreed by the Landlord. This may be difficult in the current climate but is worth exploring.
- Regear your lease: Regearing is the process of negotiating the terms of the lease with the landlord. This may be beneficial if you can negotiate a break option or a different rent.
- Assign or sublet: If your lease permits, you could assign or sublet the whole or part of the property. The lease may require you to obtain your landlord’s consent in order to do so. It is important to bear in mind that many leases have additional obligations enforced by the Landlord such as Authorised Guarantee Agreement (AGA). An AGA requires the current tenant to guarantee the performance of the incoming tenant. You will therefore need to undertake due diligence on the incoming tenant to ascertain their financial covenant strength in relation to performance of the obligations under the lease.
- Share occupation: if your lease permits you could share the space with another company. You will need to review your lease to see if the Landlord has any specific requirements for example, only sharing with a group company.
COVID-19 has led to a radical change in the way we work. For some businesses, remote working has been a success but for others the office is an important place to meet and interact with colleagues and clients.
Although COVID- 19 has created a shift to remote and more flexible working, the need of the office is still present. If you are looking to adapt or downsize your office space it is imperative you review the terms of your lease to ensure any conditions are complied with.