C: i) To Rent, or Purchase - Lease or Freehold?

This decision may often be easily made, through lack of finance, the unavailability of suitable premises in your desired location etc.  It is helpful for you to have an idea of what you would prefer before you go looking!  The very basic advantages/disadvantages are:

1. Rent:   A low cost method of starting a business.  You may not be able to change/adapt the building in the future.  You will not usually have premises to ‘sell on’ at the end of your tenure.
   
2. Freehold:  You have a property which you own, and which may appreciate in value over time.  It may also loose its value, due to a decrease in the market, planning or development changes in your area.  It can be tax efficient to purchase as part of your pension arrangements.  It will be an initial major expense/borrowing which you may not be able to afford.  A suitable property may not be available at the time you need it.
   
3. Leasehold:  A lower cost method of purchasing the rights to a building, which can be sold on, often at a premium, to another person, providing the agreement has sufficient time left. 
   

1. RENT

The following questions should be considered by anyone considering renting a commercial property:

• What is the rent? When is it payable and how often is it reviewed?
• How much notice do you have to give/be given?
• What is the rateable value? Will your business affect this? 
• Are there any restrictions on your use?  Check especially opening/access times, and signage
• Is the building listed or in a conservation area? How may this affect you?
• What is the extent of any repairs/renewals that you will be liable for internally? Can you redecorate the interior, at will?
• Whose responsibility is it to maintain the exterior? Do you have to contribute?
• Are you liable for the cost of all services? Are any shared? Are there any communal services, for which you may have to contribute?
• Is there sufficient electricity/gas/plumbing/heating/computer/telephone points? How easy is it to add additional items, and is there sufficient capacity to cope with your
  requirements?
• What are you permitted to install, alter, and remove without the landlord’s permission?
• If you make substantial alterations, will you be able to recover any costs at the end of your tenure?
• Will any neighbouring businesses affect/disrupt your operation?

It is advisable to have a detailed schedule of the building prepared, either in agreement with the landlord, or by a professional, for your protection

2. Leasehold

When purchasing a lease, from an existing leaseholder, you will have to pay a premium for the lease, possibly the value of any fixtures and fittings, often the landlord’s legal fees for dealing with the transfer to you, and the cost of any stock.

Once completed you then become legally liable for the terms of the lease, even if you cease trading!  You do not actually own the building at any stage, just the right to use it in accordance with the lease!  It is therefore worth having the building checked by a professional, to assess the condition of the building/services, so that you can then negotiate suitable reductions in the price/rent etc, if you are to repair/replace these.

• What is the rent? When is it payable, and how often is it reviewed?  You will usually have to pay the insurance rent to the landlord, for his arranging the building insurance on your behalf.  How much and when?
• What is the rateable value? Will your business affect this?  What is the actual cost of rates?
• Are there any restrictions on your use?  Check especially opening/access times, covenants, use, sub-letting, signage?
• Are the floors sufficiently strong to take the load bearing you require, the doors wide & high enough, and the floor areas clear of obstructions and of suitable height?
• Is the building in the right location?
• Is the building listed, or in a conservation area? How may this affect you?
• What is the extent of any repairs/ renewals that you will be liable for internally?Can you redecorate the interior, at will?
• Whose responsibility is it to maintain the exterior? Do you have to contribute?
• How old and what is the state of services provided?
• Are you liable for the cost of all services, or are any shared?
• Is there sufficient electricity/gas/plumbing/heating/computer/telephone points? How easy is it to add additional items, and is there sufficient capacity to cope with your requirements?
• What are you permitted to install, alter or remove without the landlord’s permission?
  If you make substantial alterations, will you be able to recover any costs at the end of your tenure?

• Will any neighbouring businesses affect/disrupt your operation?Are there any communal services, for which you may have to contribute?

A lease is a formal legal document, which you become fully liable for once signed.  Ensure that you have received advice, from qualified professionals, before you sign.  It is advisable to have a detailed schedule of the building prepared, either in agreement with the landlord, or by a professional, for your protection.  You will usually be responsible for leaving the building in the condition you found it, at the end of your lease.

3. Freehold

This is a building that you own outright, when purchased, and are free to sell whenever you wish.

Before purchasing, you are advised to have searches made, by a professional, to check that no building/planning/road layout/development is planned for your area, which might have a bearing on the future use of your property.  You are also advised to have a full structural and services survey, to assess the condition of the building, the value, plumbing, electrics etc.  If there are any problems, then this can be reflected in the purchase price.

• How much will it cost to insure the property?
• What is the rateable value, and will your business affect this?  Actual cost of rates?
• Are there any restrictions on your use?  Check especially the deeds for any covenant retrictions on: opening/access times, use, sub-letting, signage?
• Is the building listed, or in a conservation area, and how may this affect you?
• What is the extent of any repairs/renewals that you will be liable for internally and externally.
• How old and what is the state of services provided?
• Are the services all yours, or any communal?  Is so, what is your potential liability?
• Is there sufficient electricity/gas/plumbing/heating/computer/telephone points? How easy is it to add additional items, and is there sufficient capacity to cope with your requirements?
• Are the floors sufficiently strong to take the load bearing you require, the doors wide & high enough, and the floor areas clear of obstructions and of suitable height?
• Will any neighbouring businesses affect/disrupt your operation?
  Are the doors/access large enough for your present and foreseeable requirements, or can they easily be modified?
• Can the building easily be made secure, internally and externally?

Insurances

These may vary, but you will almost certainly require insurance, even if you are working from home   In the case of rented/ leasehold premises, it is quite usual for the owner to take out a policy on the building and for the tenant to pay the premium!

1. The property itself.
2. The Fixtures & Fittings
3. The Stock
4. Have liability cover for your staff, and customers, if appropriate.

You will also have to comply with any detailed requirements specified by your chosen insurer.  Appropriate security measure taken by you can often reduce the premium you pay.  For those working from home, check if your home policy covers you, and your business contents.  Often it does not.  You will almost certainly require additional cover if you are having people visiting your home in connection with your business, to cover them.

These are the basic policies, and additional policies can be taken out to cover sickness/death of key employees, private medical cover and so on.  These may not always be affordable, particularly in the initial stages of a business, but may be highly for when you can.

Fixtures and Fittings
These will vary according to the nature of your business.  There are many specialist suppliers, who can provide some or all of your requirements.