Question

One popular method of acquiring commercial is through a lease. What are the pros and cons of leasing a commercial property as a means of acquiring ownership and/or a means of controlling the property?

Answer 1

Pros

• You will have greater control over your monthly outgoings and added security in terms of finances, as well as reduced upfront costs and fixed rates on rent.
• Some maintenance of the property may lie with the landlord, such as external dilapidation, which may reduce some of the financial strain.
• If you want to relocate your business, you have more freedom over when you can move. Short term leases mean you can adapt to any changes, such as growth or downgrading.
• There is more potential for negotiation with a rental property. You could benefit from a rent free period, which can be a great way to ease pressure on a business start up or balance out dilapidation and moving costs from previous premises.
• As stated above, there are more rental properties on the market than sales, meaning you have more chance of finding the ideal property for your business.

Cons

• There are more restrictions on the changes you can make to your property, with planning permission and landlord approval standing in the way of any adaptations.
• Depending on the frequency of rent reviews, leasing can be costly in long run, as well as other possibilities such as upfront deposits eating into initial outlay.
• The landlord may pay some of the maintenance expenses, but you will be expected to pay for utility costs and internal maintenance, as well as repair work.
• You won’t have ownership over the property, meaning you miss out on the long-term stability you get with a freehold.
• When you leave the property you will be responsible for returning the property to its original state, which is potentially costly.