Monday, March 18, 2013

Checklist while buying / taking on lease property for the office

Hi Friends,
It is very important for us to due a diligence while buying or taking property on lease for your office requirements. We may follow similar kind of checklist for personal property two.
They are as follows :
1. Requirements :
First decide what is your requirement. Are you searching the premises for your additional requirement or you are moving to new premises. How many people
Going to sit in the new premises? What is your management's view about seating arrangement, style and how many people are going to sit in the premises and what is the average per square feet per employee will be.
2. Planning
Once requirement decided, plan next step. The first will be deciding on location. Speak to your management about their preference. Check your existing employee if it is replacement of your existing office requitement, check your existing employee's address and location where they are residing. If it is at extreme end of the city, possibility is that many employee may leave the job and it may adversely impact the organisation.
3. Checklist
You should apply following checklist before buying property or taking it on lease :
   I. Ownership: Check the ownership of the property. Whether it is owned by the individual, family, partnership firm or by a company. It is always better to buy a property owned by a single owner or by a company. The reason is decision making process and surity. If it is owned by multiple owner or partner in future may change their mind or decision. This may lead to future problems.
2. Check title : Check title of the property where the title is clear or not. Verify if the property is still in the owners name. You can verify it with the municipal corporation's office and also with the sub - registrar's office. Do not pay any token amount before verifying about it.
3. Checking about legality of the construction and building : Checkbthe type of land on which it is constructed. Whether it is leasehold or clear title marketable land and whether all the title of the land is transferred to the developer's name. Along with this also check whether the plan of the office / premises you are buying is approved or not. If you find the approved plan is different from the actual approved plan, never buy or take such property on lease. It will be subject to continuous harassment from government authority for bribe and possibly for demolition too. Also check if the building has got CC and OC from respective authorities. In terms if cities it will be municipal corporation.
4. Check surrounding areas
Always check surrounding areas whether it is surrounded by slun or not, availability of transportation, whether the area is safe for employees specially women employees and security in the building premises too.
5. Checking from society and other occupants : Check whether society has any objection to lease out the property. You cannot do business by fighting with the society. Also check who are the other occupants in the premises. If the occupants are professional organisation it ensures that they will pay all the maintenance properly and on time and building is maintained properly. If it has industrial type of company and such visitors you may get pan stain and uncleaned premises. If you are taking whole building, this point does not arise.
6. Free from encumbrances
Check that you should have free and unrestricted access of the property. Also check if in front of your building any slum or slumdweller does not exist. In Khar (w) Mumbai, people bought 3 shops and there was slumdwellers. Owner did not pay attention to this and after buying property when the owners tried to vacate the property they did not move (3 families ). Builder asked owner to handle and refused go help as he had already sold the property. Local MLA and police asked to pay the slum dwellers 20 lakhs Rs. This is the ground reality. If such thing exist before the premises get it cleared before paying anything to the owner.
7. Check background of the property owner
I have repeatedly informed in my previous post about background verification of candidate as well as company. Similar suggestion I give about property owner too. Check what is is other source of income, his business, criminal and financial background and whether owner has mortgaged the property. Anything weaker side in this may lead to problem.
8. Other checklist
Make sure owner handovers you all required papers. Take clarity on maintenance charges who is going to bear it. Check if all the electricity cables supplying to the premises is sufficient to the need or not if not whether owner is ready to increase it on its own cost, check whether water proofing or any basic repairing works need to be done and whether owner is ready to do so.  Check whether any society due is there or not.
9. Commercials :
Once you satisfy everything and shortlist the property, fix the commercials. It includes who will bear the maintenance charges and property taxes, lease amount/ rent amount (please do a market research on prevailing lease rate / commercials in the market. Also check who was the previous occupier on the property, reason for leaving. Never go by newspaper rate of the properties. It is always higher). Discuss about fit - out period (the rent free period given for office fit out and furnishing usually it is 60 days to 90 days). Discuss about rent for entire lease period and also lock in period I.e. before this period, the owner cannot ask you to vacate the premises (it depends on your need). You can negotiate hard if your company hold better brand value. Any smart owner will prefer to hive property to a reputed company by loosing even 25 & to 30% extra from his rental income as it gives them better surety about property and future dealings.
10. Checking area
Today, builders use concept like built up super built up carpet and usable carpet. Be cautious and careful. Check what is the actual carpet area as per the sanctioned plan and what is meant by usable carpet area. It will help you yo decide pricing when you compare different properties.
After deciding everything, raise an LoI (Letter of intent) and take signature on it from the owner.
As of now, I feel only above checklist is mandatory. I have followed this on my organisations all property need so far. If anything missed out I will add them later.
All comments, suggestions and questions are welcome.

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