Renting business premises

The advantages of renting premises

Buying business premises is a big commitment and it's important to consider carefully whether renting is a better option. Renting can provide more flexibility for your business as it grows. You are not locked into property ownership and you can usually agree with your landlord the length of the lease that you require, or have a break clause included in the lease. This will let you end the lease (usually on a specific date) if, for instance, you want to relocate.

Financially, renting can make good business sense. Upfront costs for leasing premises are often relatively low, though you may pay a premium to purchase the lease. Sometimes you may also have to provide a refundable deposit. But generally renting ties up less capital than buying, freeing up cash that could be used elsewhere in the business. See the page in this guide on the practicalities of renting premises.

You are not exposed to interest rate rises, although your rent may rise periodically as a result of rent reviews. Always check to see how rent is reviewed before you sign the lease. See our guide on renewing and ending your business lease.

There is also less potential for unexpected financial shocks - unless you wish to sell the remaining term on your lease to someone else, falls in property value will not affect you. Also, you will have no concerns about Capital Gains Tax unless you decide to sell your lease for a premium.

You may have less responsibility for the building if you rent rather than buy, although this will depend on the terms of your lease. You may have to look after repairs and maintenance inside the building but external maintenance is more likely to be the responsibility of the landlord, particularly in multi-occupancy premises, though you may have to pay a service charge. See our guide on commercial property: responsibilities of business tenants.

Renting can also give you space for negotiation. You or your agent can negotiate any aspect of the lease, either at the start or if you want to renew it after the lease ends.