Renting business premises

Advantages of renting business premises

Buying business property is a big commitment and it's important to consider carefully whether renting premises is a better option.

Flexibility of renting business premises

Renting business premises 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 rental lease. This will let you end the lease (usually on a specific date) if, for instance, you want to relocate. See business tenant's rights to end a tenancy.

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

Financial benefits of renting business premises

Financially, renting property 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 business property, freeing up cash that could be used elsewhere in the business. See practicalities of renting premises.

If you rent 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 business leases: paying rent and rent reviews.

There is also less potential for unexpected financial shocks such as a decrease in property value - unless you wish to sell the remaining term on your lease to someone else. Also, you will have no concerns about Capital Gains Tax unless you decide to sell your lease for a premium.

Maintenance of rented business property

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. However you may have to pay a service charge as part of your rental agreement. See commercial property: landlord and tenant responsibilities.

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