Analysis: How charities can get a better deal on property

Advice and support are available for third sector organisations seeking savings, Mark Wilding reports

Renegotiated rates can yield savings for charities
Renegotiated rates can yield savings for charities

Property is an expensive business, yet few people in the third sector have the time to delve into the world of rent, rates and maintenance.

But as more voluntary organisations merge, downsize, or perhaps even expand as they take on more public sector contracts, some will look at changing premises and others may want to renew a lease.

Either way, there is the potential to achieve substantial savings by arranging leases at preferential rates and, in some cases, for nothing at all. What's more, charities can often receive free advice.

The chief executives body Acevo recently found itself nearing a break clause on the lease of its London headquarters. The organisation wanted to stay in the building, but needed some advice on negotiations.

It employed a consultant who was able to extend the clause for a year with a £10,000 discount, which reduced its annual rent by about 15 per cent.

Louise Smith, director of finance at Acevo, says it is good practice to take advice on property. "A lot of charities are looking at costs and what they are spending," she says. "The savings can be really significant for any size of organisation."

Third Sector Property, a real estate consultancy that works with voluntary organisations, advised Acevo. Partner Zac Goodman says charities are often well-placed to negotiate better deals. "Charities are primarily positive cashflow organisations," he says. "For landlords, everything has become about how reliable your tenant is. In a lot of cases, charities are in a good position."

Acevo paid a consultancy fee only - 20 per cent of what savings were made. But there are other options, such as using contacts to find a sympathetic surveyor or a property firm that is prepared to offer its services without charge.

Land Aid is the property industry charity, with a focus on helping disadvantaged young people. It has put other youth charities in touch with firms prepared to help out.

Jon Siddall, its chief executive, says: "There is a willingness within the property industry to support not-for-profit and charitable organisations by bringing expertise to the table. I would advocate charities taking advantage of whatever professional advice is out there. A lot will be given on a pro bono basis."

Fairbridge, which works with disadvantaged young people, operates 17 youth centres across the UK and recently decided to move its Merseyside centre.

Land Aid helped to secure pro bono help from property consultants and lawyers, saving Fairbridge about £30,000 in fees.

Jayne Wilson, manager, Fairbridge MerseysideJayne Wilson, the Merseyside centre manager, says: "We received help to look at the space we needed, the best location and the property search. Getting that advice for free helps us show we're making the best use of the money we raise."

It is not just charities with large property portfolios that can make savings. Smaller voluntary organisations can find heavily discounted, or even free, accommodation.

Some property companies offer favourable rates as part of their social enterprise programmes. Grosvenor is a property firm managing 300 acres of property across London. The company provides part of its portfolio in Victoria for use by charities that might not otherwise be able to afford space in the area.

Jane Sandars is director of the Westminster Foundation, the charitable arm of Grosvenor. She says: "We have more than 20,000 square feet of offices which are let to about 32 charities. They occupy relatively small amounts of space, but it gives them a presence in central London."

Charities that are prepared to accept temporary accommodation are particularly well-placed to find low-cost office and retail space.

Landlords with empty properties are required to pay full business rates, whereas charities receive an 80 per cent discount. In many cases, landlords are prepared to let buildings to charities at a discount or for no rent at all because of the rates savings.

The property charity 3Space was established eight months ago to help landlords and charities take advantage of the situation. Henry Mason, its director, says: "Now is the time to be a little bit creative. There are landlords that have space they are paying rates on, but are not going to let commercially. We don't pay rent, but we do take over their rates liabilities. We then make it available to other charities."

3Space shows that it is not only charities that can benefit from re-thinking property arrangements: landlords regard charities as reliable tenants that can help them pay discounted rates.

Property might be an arcane subject, but it can yield savings that can be better spent elsewhere.

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