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Saturday, 27 February 2021

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Property matters are preventing charities from meeting their charitable objectives

CONCERNS over the affordability of premises, unforeseen costs of repair and maintenance, and cost/difficulties of compliance with safe workplace practices are preventing almost half of UK respondent charities from meeting their charitable objectives, according to a recent survey commissioned by the Ethical Property Foundation – the UK property advice charity serving the community and voluntary sector.

The Charity Property Matters Survey, which is conducted bi-annually, revealed that 45% of UK charities believe issues relating to properties are a barrier to delivering their charity objectives. The data shows that the level of concern has risen every two years, with 17% of respondents expressing concern in 2016 and 30% in 2018.

Some 49% of respondents believe they do not have a good level of knowledge and understanding of property management, which is usually a charity’s second-largest outgoing. 43% stated that they do not have suitably skilled individuals responsible for property.

In addition, 45% of respondents admitted that they have no designated fund for property maintenance and repairs.

This combination of factors has led to 51% of UK charities that participated in the survey believing that property issues pose a significant risk to their future sustainability.

Commenting for the Ethical Property Foundation, Antonia Swinson, chief executive said: “The results reflect the rollercoaster experience of so many charities in 2020. We see property as playing a growing part in sector decision making as organisations seek out new opportunities and adapt to a COVID-19 world. Whatever the future holds, we know that our sector will still be here – as resilient as the communities we serve.”

Phil Winckles, head of the northern professional services team for Matthews & Goodman, said:

“Coronavirus has had a profound and devastating impact on the charity sector and, given the fact that raising funds has been severely curtailed, managing costs, such as property, has become more critical than ever before.

“The Ethical Property Foundation’s survey highlighted just how serious a strategic issue property-related costs really are. Whether we are dealing with a single office or a multi-site portfolio, property cost management represents a huge potential liability for every organisation in this sector. Therefore, it should take centre stage and not be relegated to AOB on the agenda or deferred.”

To help navigate through this financial crisis, Matthews & Goodman outlined seven primary factors to help charities negotiate a lease:

  • Review – undertake a review of your existing properties. What roles does the property play in the operation of the charity? Is that role still relevant or has it changed?
  • Timing – start the process early. Allow 12-18 months before the lease end/break for the most advantageous position possible. Leave it too late and any bargaining position will dissipate.
  • Monitoring – ensure that someone in your organisation reviews the lease every six to 12 months to make sure any (negotiating) window is not lost and that all obligations under the terms of the lease are met.
  • Intel – research local market prices and trends when preparing a negotiating position. Do not rely solely on property portals, as this doesn’t include prices and terms negotiated, ‘off-market’ properties and those that are deemed in the ‘grey’ market (e.g. sub-let space).
  • Evaluate options – if the decision is to move premises, research the market for potential options that meet clear financial and occupational needs. Visit the preferred site and research the property, as well as the landlord’s agenda/flexibility.
  • The landlord’s agenda – landlords tend to prefer to renew existing leases. This puts the incumbent in a strong position to negotiate the best incentives that the landlord can offer to secure a renewal of the lease
  • Hire a professional – a common mistake is a belief that it’s cheaper not to delegate this complex task to a qualified and proven professional (someone who is more likely to minimise long-term costs and liability risks)

The survey also revealed that more than 60% of UK charities face problems relating to the suitability of premises for their operations.

Offices were the most common property type used by respondents (46%), followed by community/cultural centres (35%).

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