Buying business property is a big commitment and it's important to consider carefully whether renting property may be a better option for your business.
Flexibility of renting business property
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 rental lease that you require, or have a break clause included in the lease. This will let you end the rental lease (usually on a specific date) if, for instance, you want to relocate. See business tenant's rights to end a tenancy.
Renting business property can also give you space for negotiation with the landlord. 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 rental lease ends.
Financial benefits of renting business property
From a financial perspective, 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 renting business property: practicalities.
If you rent your business property 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 rental lease. See business leases: paying rent and rent reviews.
There is also less potential for unexpected economic fluctuations such as a decrease in property value - unless you wish to sell the remaining term on your rental lease to someone else. Also, you will not have to pay Capital Gains Tax unless you decide to sell your rental lease for a premium.
Maintenance responsibility in rented business property
You may have less responsibility for the building if you rent rather than buy a business property, although this will depend on the terms of your rental lease. As a tenant you may have responsibility for repairs and maintenance inside the building but external maintenance is more likely to be the responsibility of the landlord, particularly in multi-occupancy premises. Be mindful that 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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