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Should I Lease or Buy Commercial Property?

Are you having trouble deciding whether to lease or buy commercial property for your company or business? Are you thinking about taking a lease of commercial property but haven’t properly considered the alternative?

Are you having trouble deciding whether to lease or buy commercial property for your company or business? Are you thinking about taking a lease of commercial property but haven’t properly considered the alternative?

At some stage most businesses will need to occupy their own premises. The question is whether to lease those premises from someone else or whether to buy the premises outright. Both options have a number of advantages and disadvantages. Here we sum them up so that you can make an informed decision…

Advantages of taking a commercial lease

A lease will provide you with a certain degree of flexibility in terms of moving, at least if it is a short term lease. If you are expecting a good level of growth for your business over the next 2 or 3 years you might very quickly outgrow the premises you move into so the comfort of knowing you can move in 2 or 3 years times if you need to might be a key consideration.

You may generally have less duties to repair and maintain the property that you rent than if you owned it outright. Your landlord may in some cases be responsible for maintaining the structure of the building itself and decorating and maintaining the property externally, together with any common parts. Unless he is entitled to pass those costs onto you under a service charge, this means that you will generally spend less time and money on repairs and maintenance compared with owning the property yourself.

For more information on leasing or buying commercial property...

Please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 for a free discussion or email geoffrey.cotterill@everymanlegal.com

Disadvantages of taking a commercial lease

The money your company pays in rent will not be seen by your company again. It is an expenditure that will not give you a return. If your lease is subject to rent reviews the level of rent may also increase more than you might expect.

Many landlords will require a large rent deposit of at least 6-12 months. Whilst you should get this back at the end of the lease term this might represent a cash flow issue for your business.

If you take a lease that is does not have security of tenure your landlord can force you to leave the property at the end of the lease term and you will have no legal right to stay there.

You will likely have to return the property to the landlord at the end of the term in the condition in which you took it, which can be potentially costly.

Advantages of buying commercial property

The money that you pay in buying the Property and servicing a mortgage will eventually allow you to own a capital asset with value. And that asset could grow in value.

You will have control of the property. You are free to stay in the property for as long as you wish and do with it what you like (subject to any requirements of your lender). Making changes to the property will generally be much easier with far less red tape than if you take a lease.

 

Disadvantages of buying commercial property

As with any asset the property could decrease in value especially in the short term. If you are buying commercial property you need to be willing to take the risk of market fluctuations in property values.

Unless your business has a very healthy bank balance you will also likely need to take out a commercial mortgage in order to be able to finance a purchase. Whilst this isn’t necessarily a big concern it does mean that what you can and cannot do with the property will be restricted by your lender. You will probably, for example, have to get permission from your lender before subletting a part of the property to someone else.

Buying commercial property will cost a lot more in terms of up-front costs compared to taking a lease. You will need to cover the purchase deposit, legal costs, Stamp Duty Land Tax, Land Registry fees, search fees, fit-out costs and the costs of moving your business and making the property fit for purpose. Would this money be better spent invested in growing your business?

You will be responsible for all management and maintenance of the property. Repairs and updates can be costly in terms of both time and money.

Conclusion

Whether it is better for you to lease or buy commercial property for your business to occupy will ultimately depend upon a number of factors and considerations. It is always a good idea to do some general market research before deciding upon your preferred option so speak with a good agent and solicitor before making your decision.

For more information on leasing or buying commercial property...

Please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 for a free discussion or email geoffrey.cotterill@everymanlegal.com

The Everyman Legal team acted promptly and with us in mind. We were treated as an important client even though the services for the transaction were fairly routine. They always went the extra mile to keep the process moving efficiently.

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